
Aethlon Medical, Inc. Form 10-K

















false
2024
FY
0000882291



















































12208174







0000882291


2023-04-01
2024-03-31




0000882291


2023-09-29




0000882291


2024-06-25




0000882291


2024-03-31




0000882291


2023-03-31




0000882291


2022-04-01
2023-03-31




0000882291

us-gaap:CommonStockMember



2022-03-31




0000882291

us-gaap:AdditionalPaidInCapitalMember



2022-03-31




0000882291

us-gaap:RetainedEarningsMember



2022-03-31




0000882291

us-gaap:AccumulatedOtherComprehensiveIncomeMember



2022-03-31




0000882291

us-gaap:NoncontrollingInterestMember



2022-03-31




0000882291


2022-03-31




0000882291

us-gaap:CommonStockMember



2023-03-31




0000882291

us-gaap:AdditionalPaidInCapitalMember



2023-03-31




0000882291

us-gaap:RetainedEarningsMember



2023-03-31




0000882291

us-gaap:AccumulatedOtherComprehensiveIncomeMember



2023-03-31




0000882291

us-gaap:NoncontrollingInterestMember



2023-03-31




0000882291

us-gaap:CommonStockMember



2022-04-01
2023-03-31




0000882291

us-gaap:AdditionalPaidInCapitalMember



2022-04-01
2023-03-31




0000882291

us-gaap:RetainedEarningsMember



2022-04-01
2023-03-31




0000882291

us-gaap:AccumulatedOtherComprehensiveIncomeMember



2022-04-01
2023-03-31




0000882291

us-gaap:NoncontrollingInterestMember



2022-04-01
2023-03-31




0000882291

us-gaap:CommonStockMember



2023-04-01
2024-03-31




0000882291

us-gaap:AdditionalPaidInCapitalMember



2023-04-01
2024-03-31




0000882291

us-gaap:RetainedEarningsMember



2023-04-01
2024-03-31




0000882291

us-gaap:AccumulatedOtherComprehensiveIncomeMember



2023-04-01
2024-03-31




0000882291

us-gaap:NoncontrollingInterestMember



2023-04-01
2024-03-31




0000882291

us-gaap:CommonStockMember



2024-03-31




0000882291

us-gaap:AdditionalPaidInCapitalMember



2024-03-31




0000882291

us-gaap:RetainedEarningsMember



2024-03-31




0000882291

us-gaap:AccumulatedOtherComprehensiveIncomeMember



2024-03-31




0000882291

us-gaap:NoncontrollingInterestMember



2024-03-31




0000882291

aemd:MelanomaCancerContractMember



2022-04-01
2023-03-31




0000882291

aemd:CashInUSBankMember



2024-03-31




0000882291

aemd:CashInUSBankMember



2023-03-31




0000882291

aemd:CashEquivalentsInUSTreasuryBillsMember



2024-03-31




0000882291

aemd:CashEquivalentsInUSTreasuryBillsMember



2023-03-31




0000882291

aemd:CashInAustralianBankMember



2024-03-31




0000882291

aemd:CashInAustralianBankMember



2023-03-31




0000882291

aemd:StockBasedCompensationMember



2023-04-01
2024-03-31




0000882291

aemd:StockBasedCompensationMember



2022-04-01
2023-03-31




0000882291


2023-10-03
2023-10-04




0000882291

aemd:ATM2022AgreementMember



2022-03-23
2022-03-24




0000882291

aemd:ATM2022AgreementMember



2022-09-28
2022-09-29




0000882291

aemd:ATM2022AgreementMember



2024-03-31




0000882291

aemd:ATM2022AgreementMember



2023-04-01
2024-03-31




0000882291

aemd:ATM2022AgreementMember
aemd:HcWainwrightMember



2023-04-01
2024-03-31




0000882291

aemd:Director1Member
us-gaap:RestrictedStockUnitsRSUMember



2023-04-01
2024-03-31




0000882291

aemd:Director2Member
us-gaap:RestrictedStockUnitsRSUMember



2023-04-01
2024-03-31




0000882291

aemd:Director3Member
us-gaap:RestrictedStockUnitsRSUMember



2023-04-01
2024-03-31




0000882291

us-gaap:RestrictedStockUnitsRSUMember



2023-04-01
2024-03-31




0000882291

us-gaap:RestrictedStockUnitsRSUMember



2024-03-31




0000882291

aemd:ATM2022AgreementMember



2022-04-01
2023-03-31




0000882291

aemd:ATM2022AgreementMember
aemd:HcWainwrightMember



2022-04-01
2023-03-31




0000882291

us-gaap:RestrictedStockUnitsRSUMember



2022-04-01
2023-03-31




0000882291

aemd:EligibleDirectorsEachMember
us-gaap:RestrictedStockUnitsRSUMember



2022-04-01
2023-03-31




0000882291

aemd:NewlyAppointedDirectorMember
us-gaap:RestrictedStockUnitsRSUMember



2022-04-01
2023-03-31




0000882291

us-gaap:RestrictedStockUnitsRSUMember



2023-03-31




0000882291


2022-09-01
2022-09-30




0000882291

us-gaap:OptionMember



2023-04-01
2024-03-31




0000882291

us-gaap:OptionMember



2022-04-01
2023-03-31




0000882291

aemd:RSUMember



2023-04-01
2024-03-31




0000882291

us-gaap:WarrantMember



2023-03-31




0000882291

us-gaap:WarrantMember



2022-03-31




0000882291

us-gaap:WarrantMember



2023-04-01
2024-03-31




0000882291

us-gaap:WarrantMember



2022-04-01
2023-03-31




0000882291

us-gaap:WarrantMember



2024-03-31




0000882291

us-gaap:WarrantMember
aemd:RangeOfExercisePrice1Member



2024-03-31




0000882291

us-gaap:WarrantMember
aemd:RangeOfExercisePrice1Member



2023-04-01
2024-03-31




0000882291

us-gaap:WarrantMember
aemd:RangeOfExercisePrice2Member



2024-03-31




0000882291

us-gaap:WarrantMember
aemd:RangeOfExercisePrice2Member



2023-04-01
2024-03-31




0000882291

us-gaap:WarrantMember
aemd:RangeOfExercisePrice1Member



2023-03-31




0000882291

us-gaap:WarrantMember
aemd:RangeOfExercisePrice1Member



2022-04-01
2023-03-31




0000882291

us-gaap:WarrantMember
aemd:RangeOfExercisePrice2Member



2023-03-31




0000882291

us-gaap:WarrantMember
aemd:RangeOfExercisePrice2Member



2022-04-01
2023-03-31




0000882291

us-gaap:StockOptionMember



2023-04-01
2024-03-31




0000882291

us-gaap:StockOptionMember



2024-03-31




0000882291

us-gaap:OptionMember



2023-03-31




0000882291

us-gaap:OptionMember



2022-03-31




0000882291

us-gaap:OptionMember



2024-03-31




0000882291

us-gaap:OptionMember
aemd:ExercisePrice1Member



2024-03-31




0000882291

us-gaap:OptionMember
aemd:ExercisePrice1Member



2023-04-01
2024-03-31




0000882291

us-gaap:OptionMember
aemd:ExercisePrice2Member



2024-03-31




0000882291

us-gaap:OptionMember
aemd:ExercisePrice2Member



2023-04-01
2024-03-31




0000882291

us-gaap:OptionMember
aemd:ExercisePrice3Member



2024-03-31




0000882291

us-gaap:OptionMember
aemd:ExercisePrice3Member



2023-04-01
2024-03-31




0000882291

aemd:NonEmployeeDirectorsMember



2024-03-31




0000882291

aemd:Dr.FisherMember
aemd:SeparationAgreementMember



2023-04-01
2024-03-31




0000882291

aemd:SeparationAgreementMember
aemd:Dr.FisherMember



2023-12-01
2024-03-31




0000882291

aemd:AccruedBoardFeesMember



2024-03-31




0000882291

aemd:AccruedBoardFeesMember



2023-03-31




0000882291

aemd:AccruedVacationToAllEmployeesMember



2024-03-31




0000882291

aemd:AccruedVacationToAllEmployeesMember



2023-03-31




0000882291

aemd:AccruedSeparationExpensesForFormerExecutiveMember



2024-03-31




0000882291

aemd:AccruedSeparationExpensesForFormerExecutiveMember



2023-03-31




0000882291

aemd:FederalMember



2024-03-31




0000882291

aemd:StateMember



2024-03-31




0000882291

aemd:OfficeAndLaboratorySpaceMember



2023-04-01
2024-03-31




0000882291

aemd:ManufacturingSpaceMember



2023-04-01
2024-03-31




0000882291

aemd:OfficeLabAndManufacturingLeasesMember



2024-03-31



iso4217:USD


xbrli:shares




iso4217:USD


xbrli:shares




xbrli:pure








Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
(MARK ONE)
 
☒     ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended March 31, 2024
 
OR
 
☐     TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to __________
 
COMMISSION FILE NUMBER 001-37487
 
Aethlon Medical, Inc.
(Exact name of registrant as specified in its charter)
 


nevada
13-3632859

(State or other jurisdiction of
(I.R.S. Employer

incorporation or organization)
Identification No.)

 


11555 Sorrento Valley Road, Suite 203
 

San Diego, California
92121

(Address of principal executive office)
(Zip Code)

 
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA
CODE: (619) 941-0360
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF
THE EXCHANGE ACT:
 



TITLE OF EACH CLASS
COMMON STOCK, $0.001 PAR VALUE

TRADING SYMBOL
AEMD

NAME OF EACH EXCHANGE ON WHICH REGISTERED
NASDAQ CAPITAL MARKET

 
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE
ACT:
NONE
(TITLE OF CLASS)
 
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
 
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
 
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒  No ☐
  
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒  No ☐
 
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and
“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
 


 
Large accelerated filer  ☐
Accelerated filer  ☐

 
Non-accelerated filer  ☒
Smaller reporting company ☒

 
 
Emerging growth company  ☐

 
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant has
filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☐
 
If securities are registered pursuant to Section 12(b) of the Act, indicate
by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously
issued financial statements. ☐
 
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during
the relevant recovery period pursuant to § 240.10D-1(b). ☐
 
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒
 
The aggregate market value of the common stock held
by non-affiliates of the registrant as of September 29, 2023 (the last trading day of the registrant’s most recently completed second
quarter) was approximately $5.5 million, computed by reference to the closing sale price of the common stock of $2.258 per share on the
Nasdaq Capital Market on September 29, 2023. Shares of common stock held by each executive officer and director and by each person who
owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. The determination
of affiliate status is not necessarily a conclusive determination for other purposes.
 
The number of shares of the common stock of the registrant outstanding
as of June 25, 2024 was 13,899,725.
 
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s proxy statement
to be filed with the Securities and Exchange Commission, or SEC, pursuant to Regulation 14A in connection with the registrant’s
2024 Annual Meeting of Stockholders, which will be filed subsequent to the date hereof, are incorporated by reference into Part III of
this Annual Report on Form 10-K. Such proxy statement will be filed with the SEC not later than 120 days following the end of the registrant’s
fiscal year ended March 31, 2024.
 
 
 

   
 


 
TABLE OF CONTENTS
  


 
 
PAGE

PART
    I.

 
 
 

Item 1.
Business
1

 
 
 

Item 1A.
Risk Factors
15

 
 
 

Item 1B.
Unresolved Staff Comments
45

 
 
 

Item 1C.
Cybersecurity
45

 
 
 

Item 2.
Properties
46

 
 
 

Item 3.
Legal Proceedings
47

 
 
 

Item 4.
Mine Safety Disclosures
47

 
 
 

PART
    II.

 
 
 

Item 5.
Market for Registrant’s Common
    Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
48

 
 
 

Item 6.
[Reserved]
48

 
 
 

Item 7.
Management’s Discussion and
    Analysis of Financial Condition and Results of Operations
48

 
 
 

Item 7A.
Quantitative and Qualitative Disclosures
    about Market Risk
57

 
 
 

Item 8.
Financial Statements and
    Supplementary Data
57

 
 
 

Item 9.
Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure
57

 
 
 

Item 9A.
Controls and Procedures
57

 
 
 

Item 9B.
Other Information
59

 
 
 

Item 9C.
Disclosure Regarding Foreign Jurisdictions
    that Prevent Inspections
59

 
 
 

PART
    III.

 
 
 

Item 10.
Directors, Executive Officers and
    Corporate Governance
60

 
 
 

Item 11.
Executive Compensation
60

 
 
 

Item 12.
Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters
60

 
 
 

Item 13.
Certain Relationships and Related
    Transactions, and Director Independence
60

 
 
 

Item 14.
Principal Accountant Fees and Services
60

 
 
 

PART
    IV.

 
 
 

Item 15.
Exhibits and Financial Statement Schedules
61

 
 
 

Item 16.
Form 10-K Summary
64

 
 
 

Signatures
65

 
 
 

 i 
 


 

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
 
This Annual Report on Form 10-K,
or Annual Report, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933,
as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are
subject to the safe harbor created by those sections.
 
We may, in some cases, use words
such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,”
“may,” “plan,” “potential,” “predict,” “project,” “should,” “will,”
“would” or the negative of these terms, and similar expressions that convey uncertainty of future events or outcomes to identify
these forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking
statements and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by
their nature, are inherently uncertain and beyond our control. Such statements, include, but are not limited to, statements contained
in this Annual Report relating to our business, business strategy, products and services we may offer in the future, the timing and results
of future regulatory filings, the timing and results of future clinical trials, and capital outlook. Forward-looking statements are based
on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward looking statements
relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our
actual results may differ materially from those contemplated by the forward-looking statements. They are neither statement of historical
fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements.
Important factors that could cause actual results to differ materially from those in the forward looking statements include, but are not
limited to, a decline in general economic conditions nationally and internationally; the ability to protect our intellectual property
rights; competition from other providers and products; risks in product development; inability to raise capital to fund continuing operations;
changes in government regulation; the ability to complete capital raising transactions, and other factors (including the risks contained
in Item 1A of this Annual Report under the heading “Risk Factors”) relating to our industry, our operations and results of
operations and any businesses that may be acquired by us. Should one or more of these risks or uncertainties materialize, or should the
underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected,
intended or planned.
 
Factors or events that could cause
our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them, nor can we assess the
impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance
on these forward-looking statements. We cannot guarantee future results, levels of activity, performance or achievements. Except as required
by applicable law, we undertake no obligation to and do not intend to update any of the forward-looking statements to conform these statements
to actual results.
 
 
 
 
 


 ii 
 

 
SUMMARY RISK FACTORS 
 
Below is a summary of the principal factors that make
an investment in our securities speculative or risky. This summary does not address all of the risks that we face. Additional discussion
of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors”
in Part I of this Annual Report and should be carefully considered, together with other information in this Annual Report and our other
filings with the SEC before making investment decisions regarding our securities.
 


 
·
We have incurred significant losses and expect to continue to incur losses for the foreseeable future.

 
 
 

 
·
We will require additional financing to sustain our operations, achieve our business objectives and satisfy our cash obligations, which may dilute the ownership of our existing stockholders.

 
 
 

 
·
We have limited experience in identifying and working with large-scale contracts with medical device manufacturers; manufacture of our devices must comply with good manufacturing practices in the United States.

 
 
 

 
·
Delays, interruptions or the cessation of production by our third-party suppliers of important materials or delays in qualifying new materials, has and may continue to prevent or delay our ability to manufacture our Hemopurifier.

 
 
 

 
·
Our Hemopurifier technology may become obsolete.

 
 
 

 
·
If we fail to comply with extensive regulations of U.S. and foreign regulatory agencies, the commercialization of our products could be delayed or prevented entirely.

 
 
 

 
·
If we are unable to regain compliance with the listing requirements of the Nasdaq Capital Market, our common stock may be delisted from the Nasdaq Capital Market, which could have a material adverse effect on our financial condition and could make it more difficult for you to sell your shares.

 
 
 

 
·

As a public company with limited financial resources
    undertaking the launch of new medical technologies, we may have difficulty attracting and retaining executive management and directors.
 

 

·

We plan to expand our operations, which may strain
    our resources; our inability to manage our growth could delay or derail implementation of our business objectives.
 

 

·
Our success is dependent in part on our executive officers.
 

 
·
Delays in successfully commencing or completing our planned clinical trials could jeopardize our ability to obtain regulatory approval and sustain our operations.

 
 
 


 ii 
 

 
PART I
 
ITEM 1. BUSINESS
 
Unless otherwise indicated or
the context otherwise requires, references to the “Company”, “Aethlon”, “we”, “us” and
“our” refer to Aethlon Medical, Inc.
 
Overview and Corporate History
 
Overview 
 
We are a medical therapeutic company focused on developing
the Hemopurifier, a clinical-stage immunotherapeutic device designed to combat cancer and life-threatening viral infections and for use
in organ transplantation. In human studies, 164 sessions with 38 patients, the Hemopurifier was safely utilized and demonstrated the potential
to remove life-threatening viruses. In pre-clinical studies, the Hemopurifier has demonstrated the potential to remove harmful exosomes
and exosomal particles from biological fluids, utilizing its proprietary lectin-based technology. This action has potential applications
in cancer, where exosomes and exosomal particles may promote immune suppression and metastasis, and in life-threatening infectious diseases.
The U.S. Food and Drug Administration, or FDA, has designated the Hemopurifier as a “Breakthrough Device” for two independent
indications:
 


 
·
the treatment of individuals with advanced or metastatic cancer who are either unresponsive to or intolerant of standard of care therapy, and with cancer types in which exosomes or exosomal particles have been shown to participate in the development or severity of the disease; and

 
·
the treatment of life-threatening viruses that are not addressed with approved therapies.

 
Oncology
 
We believe the Hemopurifier may be a substantial advancement
in the treatment of patients with advanced and metastatic cancer through its design to bind to and remove harmful exosomes and exosomal
particles that promote the growth and spread of tumors. In October 2022, we formed a wholly-owned subsidiary in Australia to initially
conduct oncology-related clinical research, then seek regulatory approval and commercialize our Hemopurifier in Australia. We are currently
working with our contract research organization, or CRO, on preparations to conduct a clinical trial in Australia in patients with solid
tumors, including head and neck cancer, and gastrointestinal cancers.
 
In January 2023, we entered into an agreement with
North American Science Associates, LLC, or NAMSA, a world leading medical technology CRO offering global end-to-end development services,
to oversee our planned clinical trials investigating the Hemopurifier for oncology indications. Pursuant to the agreement, NAMSA agreed
to manage our planned clinical trials of the Hemopurifier for patients in the United States and Australia with various types of cancer
tumors.
 
We recently completed
an in vitro binding study of relevant oncology targets, to provide pre-clinical evidence to support our trial design and translational
endpoints. Our study indicated positive results from this study, providing evidence that our Hemopurifier removes extracellular vesicles,
or EVs, from plasma. This translational study provides pre-clinical evidence to support our planned phase 1 safety, feasibility and dose-finding
clinical trials of our Hemopurifier in patients with solid tumors who have stable or progressive disease during anti-PD-1 monotherapy
treatment, such as Keytruda® or Opdivo®. In addition to an interested initial trial site in India, we had three interested sites
in Australia that were awaiting our completion of this in vitro binding study. We added the data from this study to our Clinical
Investigator Brochure and submitted that brochure to the Ethics Committee of Royal Adelaide Hospital in Australia and in June 2024, we
received approval for our proposed phase 1 oncology trial from the Ethics Committee from Royal Adelaide Hospital. We are currently in
the process of applying to the Ethics Committees of the two additional interested clinical trial sites in Australia and the site in India.
 
 
 


 1 
 

 
Life-Threatening Viral Infections
 
We also believe that the Hemopurifier can be part of
the broad-spectrum treatment of life-threatening highly glycosylated, or carbohydrate coated, viruses that are not addressed with an already
approved treatment. In small-scale or early feasibility human studies, the Hemopurifier has been used in the past to treat individuals
infected with human immunodeficiency virus, or HIV, hepatitis-C and Ebola.
 
Additionally, in vitro, the Hemopurifier
has been demonstrated to capture Zika virus, Lassa virus, MERS-CoV, cytomegalovirus, Epstein-Barr virus, Herpes simplex virus, Chikungunya
virus, Dengue virus, West Nile virus, smallpox-related viruses, H1N1 swine flu virus, H5N1 bird flu virus, Monkeypox virus and the reconstructed
Spanish flu virus of 1918. In several cases, these studies were conducted in collaboration with leading government or non-government research
institutes.
 
We believe the Hemopurifier can be part of the treatment
of severe SARS-CoV-2 viremia/COVID-19, or COVID-19, cases. COVID viremia is detected in approximately 34% of patients and is associated
with severity, requirement for intensive care unit, or ICU, stay, development of multi-organ failure and poor outcomes. EVs and exosomal
miRNAs may play a role in the spread of infection as well as ongoing inflammation, development of coagulopathy and lung injury. Our proprietary
Galanthus nivalis agglutinin, or GNA, affinity resin has been shown to bind multiple clinically relevant SARS-CoV-2 variants. Furthermore,
studies have demonstrated in vitro removal of seven SARS-CoV2 variants (104 PFU/mL) in phosphate buffered saline passed over a
column of GNA affinity resin (1g) three times, with capture efficiencies between 53% and 89%.
 
On June 17, 2020, the FDA approved a supplement to
our open Investigational Device Exemption, or IDE, for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier
in patients with SARS-CoV-2/COVID-19, or COVID-19, in a new feasibility study. That study was designed to enroll up to 40 subjects
at up to 20 centers in the United States. Subjects were to have established laboratory diagnosis of COVID-19, be admitted to an ICU and
have acute lung injury and/or severe or life-threatening disease, among other criteria. Endpoints for this study, in addition to safety,
included reduction in circulating virus, as well as clinical outcomes (NCT # 04595903). In January 2021, the Hemopurifier was used to
treat a viremic patient, under our emergency use approval, with a predicted risk of mortality of 80% and the Hemopurifier was able to
reduce the patient’s SARS-CoV-2 plasma viral load by 58.4%. In June 2022, the first patient in this study was enrolled and
completed the Hemopurifier treatment phase of the protocol. Due to the lack of COVID-19 patients in the ICUs of our trial sites, we terminated
this study in 2022. However, our IDE for this indication remains open, as we have an active COVID-19 trial in India and wish to preserve
the option of enrolling patients if the situation with COVID-19 changes.
 
Under Single Patient Emergency Use regulations, Aethlon
has treated two patients with COVID-19 with the Hemopurifier, in addition to the COVID-19 patient treated with our Hemopurifier in our
COVID-19 clinical trial discussed above.
 
We previously reported a disruption in our Hemopurifier
supply, as our then existing supply of Hemopurifiers expired on September 30, 2022 and, also as previously disclosed, we are dependent
on FDA approval of qualified suppliers to manufacture our Hemopurifier. We recently completed final testing in order to begin manufacturing
Hemopurifiers at our new manufacturing facility in San Diego, California for use in planned U.S. clinical trials, using GNA from our current
supplier. In April 2024, we received a notice of approval from the FDA for our IDE supplement to add our San Diego manufacturing facility
and we now are able to manufacture Hemopurifiers at this site. We also have sufficient Hemopurifiers on hand for use in our planned Australia
and India oncology trials. Our intended transition to a new supplier for GNA, a component of our Hemopurifier, continues to be delayed
as we work with the FDA for approval of our supplement to our IDE, which is required to make this manufacturing supplier change. We are
working with the FDA to qualify this second supplier of our GNA.
 
We also obtained ethics review board, or ERB, approval
from and entered into a clinical trial agreement with Medanta Medicity Hospital, a multi-specialty hospital in Delhi NCR, India, for a
COVID-19 clinical trial at that location.
 
In May 2023, we received ERB approval from the MAMC,
for a second site for our clinical trial in India to treat severe COVID-19. MAMC was established in 1958 and is located in New Delhi,
India. MAMC is affiliated with the University of Delhi and is operated by the Delhi government.
 
 
 


 2 
 

 
We now have two sites in India for this trial with
the Medanta Medicity Hospital and Maulana Azad Medical College, or MAMC. One patient has been treated to date; however, we have been informed
by our CRO that a new COVID-19 subvariant was detected in India recently. Our COVID-19 trial in India remains open in the event that there
are COVID-19 admissions to the ICUs at our sites in India.
 

Organ Transplantation
 
Additionally, based on preclinical
data with acellular kidney perfusates, we believe that the Hemopurifier has potential applications in organ transplantation. We are investigating
whether the Hemopurifier, when incorporated into a machine perfusion organ preservation circuit, can remove harmful viruses, exosomes,
RNA molecules, cytokines, chemokines and other inflammatory molecules from recovered organs. We initially are focused on recovered kidneys
from deceased donors. We have previously demonstrated the removal of multiple viruses and exosomes and exosomal particles from buffer
solutions, in vitro, utilizing a scaled-down version of our Hemopurifier and believe this process could reduce transplantation
complications by improving graft function, reducing graft rejection, maintaining or improving organ viability prior to transplantation,
and potentially reducing the number of kidneys rejected for transplant.
 
Successful outcomes of human
trials will also be required by the regulatory agencies of certain foreign countries where we plan to market and sell the Hemopurifier.
Some of our patents may expire before FDA approval or approval in a foreign country, if any, is obtained. However, we believe that certain
patent applications and/or other patents issued to us more recently will help protect the proprietary nature of our Hemopurifier treatment
technology.
 
In addition to the foregoing, we are monitoring closely
the impact of inflation, recent bank failures and the war between Russia and Ukraine and the military conflicts in Israel and the surrounding
areas, as well as related political and economic responses and counter-responses by various global factors on our business. Given the
level of uncertainty regarding the duration and impact of these events on capital markets and the U.S. economy, we are unable to assess
the impact on our timelines and future access to capital. The full extent to which inflation, recent bank failures and the ongoing military
conflicts will impact our business, results of operations, financial condition, clinical trials and preclinical research will depend on
future developments, as well as the economic impact on national and international markets that are highly uncertain.
 
On March 10, 1999, Aethlon, Inc., a California corporation,
Hemex, Inc., a Delaware corporation and the accounting predecessor to Aethlon, Inc., and Bishop Equities, Inc., a publicly traded Nevada
corporation, completed an Agreement and Plan of Reorganization structured to result in Bishop Equities, Inc.'s acquisition of all of the
outstanding common stock of Aethlon, Inc. and Hemex, Inc. Under the plan's terms, Bishop Equities, Inc. issued shares of its common stock
to the stockholders of Aethlon, Inc. and Hemex, Inc. such that Bishop Equities, Inc. then owned 100% of each company. Upon completion
of the transaction, Bishop Equities, Inc. was renamed Aethlon Medical, Inc. Our executive offices are located at 11555 Sorrento Valley
Road, Suite 203, San Diego, California 92121. Our telephone number is (619) 941-0360. Our website address is www.aethlonmedical.com. The
information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this Annual Report.  
 
The Mechanism of the Hemopurifier
 
The Hemopurifier is an affinity
hemofiltration device designed for the single-use removal of harmful exosomes and life-threatening viruses from the human circulatory
system. In the United States, the Hemopurifier is classified as a combination product whose regulatory jurisdiction is the Center for
Devices and Radiological Health, or CDRH, the branch of FDA responsible for the premarket approval of all medical devices.
 
In our current applications, our
Hemopurifier can be used on the established infrastructure of continuous renal replacement therapy, or CRRT, and dialysis instruments
located in hospitals and clinics worldwide. It could also potentially be developed as part of a proprietary closed system with its own
pump and tubing set, negating the requirement for dialysis infrastructure. Incorporated within the Hemopurifier is a protein called a
lectin, that aids in binding exosomes and viruses.
 
 
 


 3 
 

 
The Hemopurifier - Clinical Trials In Viral Infections
  
The initial development of the
Hemopurifier was focused on viral infections. In non-clinical bench experiments using a laboratory version of the Hemopurifier, performed
in Company labs as well as in multiple other outside labs, including the Centers for Disease Control and Prevention, or CDC, the United
States Army Medical Research Institute of Infectious Diseases, or USAMRIID, Battelle Memorial Research Institute and others, we have demonstrated
that a miniature version of the Hemopurifier can bind and clear multiple different glycosylated viruses. These viruses include HIV, HCV,
Dengue, West Nile, multiple strains of influenza, Ebola, Chikungunya, smallpox, monkeypox, multiple herpes viruses, a MERS-CoV related
pseudovirus and others.
 
Initial clinical trials on the
Hemopurifier were conducted overseas on dialysis patients with HCV, with a subsequent EFS conducted in the United States under an FDA
approved IDE.
 
On March 13, 2017, we concluded
an FDA-approved EFS under an IDE in end stage renal disease patients on dialysis who were infected with HCV. The study was conducted at
DaVita MedCenter Dialysis in Houston, Texas. We reported that there were no device-related adverse events in enrolled subjects who met
the study inclusion-exclusion criteria. We also reported that an average capture of 154 million copies of HCV (in International Units,
I.U.) within the Hemopurifier during four-hour treatments. Prior to this approval, we collected supporting Hemopurifier data through investigational
human studies conducted overseas.
 
SARS-CoV-2/COVID-19 
 
SARS-COV-2, the causative agent
of COVID-19 is a member of the coronavirus family, which includes the original SARS virus, SARS-CoV, and the MERS virus. SARS-CoV-2, like
all coronaviruses, is glycosylated. This suggests that the Hemopurifier could potentially clear it from biological fluids, including blood.
 
On June 17, 2020, the FDA approved
a supplement to our open IDE for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier in patients with SARS-CoV-2/COVID-19
in a New Feasibility Study. That study was designed to enroll up to 40 subjects at up to 20 centers
in the United States. Subjects had to have an established laboratory diagnosis of COVID-19, be admitted to an ICU, and have acute lung
injury and/or severe or life-threatening disease, among other criteria. Endpoints for this study, in addition to safety, include reduction
in circulating virus, as well as clinical outcomes (NCT # 04595903). In June 2022, the Company completed the treatment protocol for its
first patient in this study.
 
In
September 2021, we entered into an agreement with a leading global CRO to oversee our U.S. clinical studies investigating the Hemopurifier
for critically ill COVID-19 patients. Due to lack of COVID-19 patients in the ICUs of our trial sites, we terminated this study
in 2022.
 
Under
Single Patient Emergency Use regulations, we have also treated two patients with COVID-19 with the Hemopurifier, in addition to
the COVID-19 patient treated with our Hemopurifier in our COVID-19 clinical trial discussed above. We
published a manuscript reviewing case studies covering those two Single Patient Emergency Use treatments entitled “Removal of COVID-19
Spike Protein, Whole Virus, Exosomes and Exosomal microRNAs by the Hemopurifier® Lectin-Affinity Cartridge in Critically Ill Patients
with COVID-19 Infection.” 
 
The
manuscript described the use of the Hemopurifier for a total of nine sessions in two critically ill COVID-19 patients. The first case
study demonstrated the improvement in the patient who was a SARS-COV-2 positive COVID-19 present at entry to the hospital, with associated
coagulopathy, or CAC, lung injury, inflammation, and tissue injury despite the absence of demonstrable COVID-19 viremia at the start of
treatment at Day 22 and having demonstrated strong viremia earlier in the patient’s disease cycle, suggesting that the significant
removal of exosomes contributed to the patient’s recovery. This patient received eight Hemopurifier treatments without complications
and eventually was weaned from a ventilator and was discharged from the hospital. 
 
 
 


 4 
 

 
The
second patient case study demonstrated in vivo removal of SARS-CoV-2 virus from the blood stream of an infected patient. This patient
completed a six-hour Hemopurifier treatment without complications and subsequently was placed on continuous renal replacement therapy,
or CRRT. The patient ultimately expired three hours after being placed on CRRT because of the advanced stage of the patient’s disease.

 
In
May 2022, we announced the publication of a pre-print manuscript featuring data that demonstrated our proprietary GNA affinity resin was
able to bind seven clinically relevant SARS-CoV-2 variants in vitro, including the Delta and Omicron variants. Viral capture efficiency
with the GNA affinity resin ranged from 53% to 89% for all variants tested. The GNA affinity resin is a key component of the Hemopurifier.
The manuscript is titled "Removal of Clinically Relevant SARS-CoV-2 Variants by An Affinity Resin Containing Galanthus nivalis Agglutinin"
and was published in bioRxiv. 
 
We
previously commissioned Battelle Memorial Institute in 2008 to run a monkeypox virus, or MPV, in vitro study using a mini-Hemopurifier.
This study demonstrated that high concentrations of MPV (approximately 35 thousand cpu/ml) were rapidly depleted from cell culture fluids
when circulated through the Hemopurifier. The study data indicated that the Hemopurifier removed 44 percent of infectious MPV in the first
hour of testing, 82 percent after six hours, and 98 percent after 20 hours. The studies were conducted in triplicate and data verification
was provided by real-time polymerase chain reaction.
 
The Hemopurifier – Clinical Trials Conducted Overseas in Viral
Infections
 
EBOLA Virus
 
In December of 2014, Time Magazine
named the Hemopurifier a “Top 25 Invention” as the result of treating an Ebola-infected physician at Frankfurt University
Hospital in Germany. The physician was comatose with multiple organ failure at the time of treatment with the Hemopurifier. At the American
Society of Nephrology Annual Meeting, Dr. Helmut Geiger, Chief of Nephrology at Frankfurt University Hospital reported that the patient
received a single 6.5 hour Hemopurifier treatment. Prior to treatment, viral load was measured at 400,000 copies/ml. Post-treatment viral
load reported to be at 1,000 copies/ml. Dr. Geiger also reported that 242 million copies of Ebola virus were captured within the Hemopurifier
during treatment. The patient ultimately made a full recovery. Based on this experience, the Company filed an Expanded Access protocol
with the FDA to treat Ebola virus infected patients in up to ten centers in the United States and a corresponding protocol was approved
by HealthCanada. These protocols remain open allowing Hemopurifier treatment to be offered to patients presenting for care in both countries.
In 2018, the FDA designated the Hemopurifier as a Breakthrough Device “… for the treatment of life-threatening viruses that
are not addressed with approved therapies.”
  
Hepatitis C Virus (HCV)
 
Prior to FDA approval of the IDE
feasibility study, we conducted investigational HCV treatment studies at the Apollo Hospital, Fortis Hospital and the Medanta Medicity
Institute in India. In the Medanta Medicity Institute study, 12 HCV-infected individuals were enrolled to receive three six-hour Hemopurifier
treatments during the first three days of a 48-week peginterferon+ribavirin treatment regimen. The study was conducted under the leadership
of Dr. Vijay Kher. Dr. Kher’s staff reported that Hemopurifier therapy was well tolerated and without device-related adverse events
in the 12 treated patients.
 
Of these 12 patients, ten completed
the Hemopurifier-peginterferon+ribavirin treatment protocol, including eight genotype-1 patients and two genotype-3 patients. Eight of
the ten patients achieved a sustained virologic response, which is the clinical definition of treatment cure and is defined as undetectable
HCV in the blood 24 weeks after the completion of the 48-week peginterferon+ribavirin drug regimen. Both genotype-3 patients achieved
a sustained virologic response, while six of the eight genotype-1 patients achieved a sustained virologic response, which defines a cure
of the infection.
 
Hemopurifier - Human Immunodeficiency Virus (HIV)
 
In addition to treating Ebola
and HCV-infected individuals, we also conducted a single proof-of-principle treatment study at the Sigma New Life Hospital in an AIDS
patient who was not being administered HIV antiviral drugs. In the study, viral load was reduced by 93% as the result of 12 Hemopurifier
treatments (each four hours in duration) that were administered over the course of one month.
 
 
 


 5 
 

 

U.S. GOVERNMENT CONTRACTS
 
We did not recognize revenue from
government contracts in the fiscal year ended March 31, 2024. We have recognized revenue under the following government contract/grant
in the fiscal year ended March 31, 2023:
 
Phase 2 Melanoma Cancer Contract
 
On September 12, 2019, the National
Cancer Institute, or NCI, part of the National Institutes of Health, or NIH, awarded to us a SBIR Phase II Award Contract, for NIH/NCI
Topic 359, entitled “A Device Prototype for Isolation of Melanoma Exosomes for Diagnostics and Treatment Monitoring”, or the
Award Contract. The Award Contract amount was $1,860,561 and, as amended, ran for the period from September 16, 2019 through September
15, 2022.
 
The work performed pursuant to
this Award Contract was focused on melanoma exosomes. This work followed from our completion of a Phase I contract for the Topic 359 solicitation
that ran from September 2017 through June 2018, as described below. Following on the Phase I work, the deliverables in the Phase II program
involved the design and testing of a pre-commercial prototype of a more advanced version of the exosome isolation platform.
 
The Award Contract ended on September
15, 2022 and we presented the required final report to the NCI. As the NCI completed its close out review of the contract, we recognized
as revenue $574,245 on our statement of operations for the fiscal year ended March 31, 2023.
 
Research and Development Costs
 
A substantial portion of our
operating budget is used for research and development activities. The cost of research and development, all of which has been charged
to operations, amounted to approximately $2,520,000 and $2,745,000 in the fiscal years ended March 31, 2024 and 2023, respectively.
 
Intellectual Property
 
We currently own or have license
rights to a number of U.S. and foreign patents and patent applications and endeavor to continually improve our intellectual property position.
We consider the protection of our technology, whether owned or licensed, to the exclusion of use by others, to be vital to our business.
While we intend to focus primarily on patented or patentable technology, we also rely on trade secrets, unpatented property, know-how,
regulatory exclusivity, patent extensions and continuing technological innovation to develop our competitive position. We also own certain
trademarks.
 
Our success depends in large part
on our ability to protect our proprietary technology, including the Hemopurifier product platform, and to operate without infringing the
proprietary rights of third parties. We rely on a combination of patent, trade secret, copyright and trademark laws, as well as confidentiality
agreements, licensing agreements and other agreements, to establish and protect our proprietary rights. Our success also depends, in part,
on our ability to avoid infringing patents issued to others. If we were judicially determined to be infringing on any third-party patent,
we could be required to pay damages, alter our products or processes, obtain licenses or cease sales of products or certain activities.
 
To protect our proprietary medical
technologies, including the Hemopurifier product platform and other scientific discoveries, we have a portfolio of over 46 issued patents
and pending applications worldwide. We currently have five issued U.S. patents and 24 issued patents in countries outside of the United
States. In addition, we have 17 patent applications pending worldwide related to our Hemopurifier product platform and other technologies.
We are seeking additional patents on our scientific discoveries.
 
It is possible that our pending
patent applications may not result in issued patents, that we will not develop additional proprietary products that are patentable, that
any patents issued to us may not provide us with competitive advantages or will be challenged by third parties and that the patents of
others may prevent the commercialization of products incorporating our technology. Furthermore, others may independently develop similar
products, duplicate our products or design around our patents. U.S. patent applications are not immediately made public, so it is possible
that a third party may obtain a patent on a technology we are actively using.
 
 
 


 6 
 

 
There is a risk that any patent
applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalid or unenforceable.
For many of our pending applications, patent interference proceedings may be instituted with the U.S. Patent and Trademark Office, or
the USPTO, when more than one person files a patent application covering the same technology, or if someone wishes to challenge the validity
of an issued patent. At the completion of the interference proceeding, the USPTO will determine which competing applicant is entitled
to the patent, or whether an issued patent is valid. Patent interference proceedings are complex, highly contested legal proceedings,
and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect to any of our patent
applications, we may experience significant expenses and delays in obtaining a patent, and if the outcome of the proceeding is unfavorable
to us, the patent could be issued to a competitor rather than to us. Third parties can file post-grant proceedings in the USPTO,
seeking to have issued patent invalidated, within nine months of issuance. This means that patents undergoing post-grant proceedings may
be lost, or some or all claims may require amendment or cancellation, if the outcome of the proceedings is unfavorable to us. Post-grant
proceedings are complex and could result in a reduction or loss of patent rights. The institution of post-grant proceedings against our
patents could also result in significant expenses.
 
Patent law outside the United
States is uncertain and in many countries, is currently undergoing review and revisions. The laws of some countries may not protect our
proprietary rights to the same extent as the laws of the United States. Third parties may attempt to oppose the issuance of patents to
us in foreign countries by initiating opposition proceedings. Opposition proceedings against any of our patent filings in a foreign country
could have an adverse effect on our corresponding patents that are issued or pending in the United States. It may be necessary or useful
for us to participate in proceedings to determine the validity of our patents or our competitors’ patents that have been issued
in countries other than the United States. This could result in substantial costs, divert our efforts and attention from other aspects
of our business, and could have a material adverse effect on our results of operations and financial condition. Outside of the United
States, we currently have pending patent applications or issued patents in Europe, India, Russia, Canada, Japan, Singapore and Hong Kong.
 
In addition to patent protection,
we rely on unpatented trade secrets and proprietary technological expertise. It is possible that others could independently develop or
otherwise acquire substantially equivalent technology, somehow gain access to our trade secrets and proprietary technological expertise
or disclose such trade secrets, or that we may not successfully ultimately protect our rights to such unpatented trade secrets and proprietary
technological expertise. We rely, in part, on confidentiality agreements with our marketing partners, employees, advisors, vendors and
consultants to protect our trade secrets and proprietary technological expertise. We cannot assure you that these agreements will not
be breached, that we will have adequate remedies for any breach or that our unpatented trade secrets and proprietary technological expertise
will not otherwise become known or be independently discovered by competitors.
 
Patents
 
The following table lists our issued patents and patent
applications, including their ownership status, including relevant patent term adjustments (PTA), which is a process of extending the
term of a U.S. patent:
 
Patents Issued in the United States


PATENT #
PATENT NAME

ISSUANCE
DATE

OWNED OR
LICENSED

EXPIRATION
DATE

9,707,333
Extracorporeal removal of microvesicular particles
7/18/17
Owned
1/6/29

9,364,601
Extracorporeal removal of microvesicular particles
6/14/16
Owned
5/30/29 as terminal disclaimer filed over 8,288,172

8,288,172
Extracorporeal removal of microvesicular particles 
10/16/12
Owned

3/09/27
05/30/29 (with 813 days Patent Term Adjustment
(PTA))

7,226,429
Method for removal of viruses from blood by lectin affinity hemodialysis
6/5/07
Owned
1/20/25 (with 366 days PTA)

10,022,483
Method for removal of viruses from blood by lectin affinity hemodialysis
7/17/18
Owned
8/8/24 (with 201 days PTA)

 
 
 


 7 
 

 
Patent Applications Pending in the United States


APPLICATION #
APPLICATION NAME

FILING
DATE

OWNED OR
LICENSED

17/918,085
Devices and methods for treating a coronavirus infection and symptoms thereof
10/10/22
Owned

18/700571
Devices and methods for treating a viral infection and symptoms thereof
04/11/24
Owned

 
Foreign Patents


PATENT #
PATENT NAME

ISSUANCE
DATE

OWNED OR
LICENSED

EXPIRATION
DATE

2591359
Methods for quantifying exosomes (Germany)
3/01/17
Owned
7/07/31

2591359
Methods for quantifying exosomes (France)
3/01/17
Owned
7/07/31

2591359
Methods for quantifying exosomes (Great Britain)
3/01/17
Owned
7/07/31

2591359
Methods for quantifying exosomes (Spain)
3/01/17
Owned
7/07/31

2644855
Extracorporeal removal of microvesicular particles (Canada)
11/19/19
Owned
3/09/27

3061952
Extracorporeal removal of microvesicular particles (Canada)
7/19/22
Owned
3/09/27

502019000055563
Extracorporeal removal of microvesicular particles (Germany)
4/24/19
Owned
3/09/27

1993600
Extracorporeal removal of microvesicular particles (Switzerland)
4/24/19
Owned
3/09/27

1993600
Extracorporeal removal of microvesicular particles (Spain)
4/24/19
Owned
3/09/27

1993600
Extracorporeal removal of microvesicular particles (France)
4/24/19
Owned
3/09/27

1993600
Extracorporeal removal of microvesicular particles (Great Britain)
4/24/19
Owned
3/09/27

502019000055563
Extracorporeal removal of microvesicular particles (Italy)
4/24/19
Owned
3/09/27

1993600
Extracorporeal removal of microvesicular particles (Netherlands)
4/24/19
Owned
3/09/27

1993600
Extracorporeal removal of microvesicular particles (Sweden)
4/24/19
Owned
3/09/27

1126138
Extracorporeal removal of microvesicular particles (Hong Kong)
6/19/20
Owned
3/09/27

3517151
Extracorporeal removal of microvesicular particles (Switzerland)
4/21/21
Owned
3/09/27

60 2007 061 082.6
Extracorporeal removal of microvesicular particles (Germany)
4/21/21
Owned
3/09/27

3517151
Extracorporeal removal of microvesicular particles (Denmark)
4/21/21
Owned
3/09/27

2880460
Extracorporeal removal of microvesicular particles (Spain)
4/21/21
Owned
3/09/27

3517151
Extracorporeal removal of microvesicular particles (France)
4/21/21
Owned
3/09/27

3517151
Extracorporeal removal of microvesicular particles (Great Britain)
4/21/21
Owned
3/09/27

3517151
Extracorporeal removal of microvesicular particles (Ireland)
4/21/21
Owned
3/09/27

3517151
Extracorporeal removal of microvesicular particles (Netherlands)
4/21/21
Owned
3/09/27

3517151
Extracorporeal removal of microvesicular particles (Sweden)
4/21/21
Owned
3/09/27

 
Pending Foreign Patent Applications


APPLICATION #
APPLICATION NAME
FILING
DATE
OWNED OR LICENSED




8139/DELNP/2008
Extracorporeal removal of microvesicular particles (exosomes) (India)
3/9/07
Owned

2939652
Brain specific exosome based diagnostics and extracorporeal therapies (Canada)
8/12/06
Owned

2021256402
Devices and methods for treating a coronavirus infection and symptoms thereof (Australia)
10/16/22
Owned

3178687
Devices and methods for treating a coronavirus infection and symptoms thereof (Canada)
9/29/22
Owned

21788894.0
Devices and methods for treating a coronavirus infection and symptoms thereof (Europe)
10/26/22
Owned

62023077768.7
Devices and methods for treating a coronavirus infection and symptoms thereof (Hong Kong)
08/17/23
Owned

297109
Devices and methods for treating a coronavirus infection and symptoms thereof (Israel)
10/6/22
Owned

2023-505809
Devices and methods for treating a coronavirus infection and symptoms thereof (Japan)
10/12/22
Owned

11202253625T
Devices and methods for treating a coronavirus infection and symptoms thereof (Singapore)
9/29/22
Owned

11202253625T
Devices and methods for treating a viral infection and symptoms thereof (Australia)
04/12/24
Owned

 
 
 
 

2024-522200
Devices and methods for treating a viral infection and symptoms thereof (Japan)
04/12/24
Owned 

11202402448W
Devices and methods for treating a viral infection and symptoms thereof (Singapore)
04/11/24
Owned

11202402448W
Devices and methods for treating a viral infection and symptoms thereof (Canada)
4/11/2024 
Owned

11202402448W
Devices and methods for treating a viral infection and symptoms thereof (Europe)
4/23/2024
Owned

 
 
 


 8 
 

 
Pending International Patent Applications


APPLICATION #
APPLICATION NAME

FILING
DATE

OWNED OR
LICENSED

PCT/US2024/015614
Removal of exosomes, ectosomes, mirnas, circulating nucleic acids, and viral particles with
2/13/24
Owned

 

Trademarks


APPLICATION NAME
FILING DATE
OWNED OR LICENSED

TAUSOME
7/24/2015
Owned 

SANSAGITTA
7/8/2021
Owned 

HEMOSAGITTA
1/13/2021
Owned 

 
Trademarks
 
In addition to the Tausome, Sansagitta
and Hemosagitta trademarks noted in the above table, we also have trademark registrations in the United States for Hemopurifier and Aethlon
Medical, Inc., and obtained a trademark registration in India for Hemopurifier. We also have common law trademark rights in Aethlon ADAPT™
and ELLSA™.
 
Licensing and Assignment Agreements
 
On November 7, 2006, we executed
an assignment agreement with the London Health Science Center Research, Inc. under which an invention and related patent rights for a
method to treat cancer were assigned to us. The invention provides for the "Extracorporeal removal of microvesicular particles"
for which the U.S. Patent and Trademark Office granted a patent (Patent No.8,288,172) in the United States as of October 2012. The agreement
provided for an upfront payment of six shares of unregistered common stock and a 2% royalty on any future net sales of all products or
services, the sale of which would infringe in the absence of the assignment granted under this agreement. We are also responsible for
paying certain patent application and filing costs. Under the assignment agreement, we own the patents until their respective expirations.
Under certain circumstances, ownership of the patents may revert to the London Health Science Center Research, Inc. if there is an uncured
substantial breach of the assignment agreement.
 
Industry & Competition
 
The industry for treating infectious
disease and cancer is extremely competitive, and companies developing new treatment procedures face significant capital and regulatory
challenges. As our Hemopurifier is a clinical-stage device, we have the additional challenge of establishing medical industry support,
which will be driven by treatment data resulting from human clinical studies. Should our device become market cleared by the FDA or the
regulatory body of another country, we may face significant competition from well-funded pharmaceutical organizations. Additionally, we
would likely need to establish large-scale production of our device in order to be competitive. Our competitors include blood filters
produced by Exthera Medical Corporation.
 
Government Regulation
 
The Hemopurifier is subject to
regulation by numerous regulatory bodies, primarily the FDA, and comparable international regulatory agencies. These agencies require
manufacturers of medical devices to comply with applicable laws and regulations governing the development, testing, manufacturing, labeling,
marketing, storage, distribution, advertising and promotion, and post-marketing surveillance reporting of medical devices. As the primary
mode of action of the Hemopurifier is attributable to the device component of this combination product, the CDRH has primary jurisdiction
over its premarket development, review and approval. Failure to comply with applicable requirements may subject a device and/or its manufacturer
to a variety of administrative sanctions, such as issuance of warning letters, import detentions, civil monetary penalties and/or judicial
sanctions, such as product seizures, injunctions and criminal prosecution.
  
 
 


 9 
 

 
FDA’s Pre-market Clearance and Approval
Requirements  
 
Each medical device we seek to
commercially distribute in the United States will require either a prior 510(k) clearance, unless it is exempt, or a pre-market approval
from the FDA. Generally, if a new device has a predicate that is already on the market under a 510(k) clearance, the FDA will allow that
new device to be marketed under a 510(k) clearance; otherwise, a premarket approval, or PMA, is required. Medical devices are classified
into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each
medical device and the extent of control needed to provide reasonable assurance of safety and effectiveness. Class I devices are
deemed to be low risk and are subject to the general controls of the Federal Food, Drug and Cosmetic Act, such as provisions that relate
to: adulteration; misbranding; registration and listing; notification, including repair, replacement, or refund; records and reports;
and good manufacturing practices. Most Class I devices are classified as exempt from pre-market notification under section 510(k)
of the FD&C Act, and therefore may be commercially distributed without obtaining 510(k) clearance from the FDA. Class II devices
are subject to both general controls and special controls to provide reasonable assurance of safety and effectiveness. Special controls
include performance standards, post market surveillance, patient registries and guidance documents. A manufacturer may be required to
submit to the FDA a pre-market notification requesting permission to commercially distribute some Class II devices. Devices deemed
by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially
equivalent to a previously cleared 510(k) device, are placed in Class III. A Class III device cannot be marketed in the United
States unless the FDA approves the device after submission of a PMA. However, there are some Class III devices for which FDA has
not yet called for a PMA. For these devices, the manufacturer must submit a pre-market notification and obtain 510(k) clearance in orders
to commercially distribute these devices. The FDA can also impose sales, marketing or other restrictions on devices in order to assure
that they are used in a safe and effective manner. We believe that the Hemopurifier will be classified as a Class III device and as such
will be subject to PMA submission and approval.
 
Pre-market Approval Pathway 
 
A pre-market approval application
must be submitted to the FDA for Class III devices for which the FDA has required a PMA. The pre-market approval application process
is much more demanding than the 510(k) pre-market notification process. A pre-market approval application must be supported by extensive
data, including but not limited to technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s
satisfaction reasonable evidence of safety and effectiveness of the device.
 
After a pre-market approval application
is submitted, the FDA has 45 days to determine whether the application is sufficiently complete to permit a substantive review and thus
whether the FDA will file the application for review. The FDA has 180 days to review a filed pre-market approval application, although
the review of an application generally occurs over a significantly longer period of time and can take up to several years. During this
review period, the FDA may request additional information or clarification of the information already provided. Also, an advisory panel
of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the
approvability of the device.
 
Although the FDA is not bound
by the advisory panel decision, the panel’s recommendations are important to the FDA’s overall decision making process. In
addition, the FDA may conduct a preapproval inspection of the manufacturing facility to ensure compliance with the Quality System Regulation,
or QSR. The agency also may inspect one or more clinical sites to assure compliance with FDA’s regulations.
 
Upon completion of the PMA review,
the FDA may: (i) approve the PMA which authorizes commercial marketing with specific prescribing information for one or more indications,
which can be more limited than those originally sought; (ii) issue an approvable letter which indicates the FDA’s belief that
the PMA is approvable and states what additional information the FDA requires, or the post-approval commitments that must be agreed to
prior to approval; (iii) issue a not approvable letter which outlines steps required for approval, but which are typically more onerous
than those in an approvable letter, and may require additional clinical trials that are often expensive and time consuming and can delay
approval for months or even years; or (iv) deny the application. If the FDA issues an approvable or not approvable letter, the applicant
has 180 days to respond, after which the FDA’s review clock is reset.
 
Emergency Use Authorizations,
or EUAs, are granted by FDA in public health emergencies but allow use of the authorized device only during the period of the respective
public health emergency, and do not change the requirement to ultimately seek PMA approval after the authorization period has ended.
  
 
 


 10 
 

 
Clinical Trials
 
Clinical trials are almost always
required to support pre-market approval and are sometimes required for 510(k) clearance. In the United States, for significant risk devices,
these trials require submission of an application for an IDE to the FDA. The IDE application must be supported by appropriate data, such
as animal and laboratory testing results, showing it is safe to test the device in humans and that the testing protocol is scientifically
sound. The IDE must be approved in advance by the FDA for a specific number of patients at specified study sites. During the trial, the
sponsor must comply with the FDA’s IDE requirements for investigator selection, trial monitoring, reporting and recordkeeping. The
investigators must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition
of investigational devices and comply with all reporting and recordkeeping requirements. Clinical trials for significant risk devices
may not begin until the IDE application is approved by the FDA and the appropriate institutional review boards, or IRBs, at the clinical
trial sites. An IRB is an appropriately constituted group that has been formally designated to review and monitor medical research involving
subjects and which has the authority to approve, require modifications in, or disapprove research to protect the rights, safety and welfare
of human research subjects. The FDA or the IRB at each site at which a clinical trial is being performed may withdraw approval of a clinical
trial at any time for various reasons, including a belief that the risks to study subjects outweigh the benefits or a failure to comply
with FDA or IRB requirements. Even if a trial is completed, the results of clinical testing may not demonstrate the safety and effectiveness
of the device, may be equivocal or may otherwise not be sufficient to obtain approval or clearance of the product.
 
Ongoing Regulation by the FDA 
 
Even after a device receives clearance or approval
and is placed on the market, numerous regulatory requirements apply. These include:
 


 
·
establishment registration and device listing;

 


 
·
the QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;

 


 
·
labeling regulations and the FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses and other requirements related to promotional activities;

 


 
·
medical device reporting regulations, which require that manufactures report to the FDA if their device may have caused or contributed to a death or serious injury, or if their device malfunctioned and the device or a similar device marketed by the manufacturer would be likely to cause or contribute to a death or serious injury if the malfunction were to recur;

 


 
·
corrections and removal reporting regulations, which require that manufactures report to the FDA field corrections or removals if undertaken to reduce a risk to health posed by a device or to remedy a violation of the FDCA that may present a risk to health; and

 


 
·
post market surveillance regulations, which apply to certain Class II or III devices when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

 
Some changes to an approved PMA
device, including changes in indications, labeling or manufacturing processes or facilities, require submission and FDA approval of a
new PMA or PMA supplement, as appropriate, before the change can be implemented. Supplements to a PMA often require the submission of
the same type of information required for an original PMA, except that the supplement is generally limited to that information needed
to support the proposed change from the device covered by the original PMA. The FDA uses the same procedures and actions in reviewing
PMA supplements as it does in reviewing original PMAs.
  
 
 


 11 
 

 
Failure by us or by our suppliers
to comply with applicable regulatory requirements can result in enforcement action by the FDA or state authorities, which may include
any of the following sanctions:
 


 
·
warning or untitled letters, fines, injunctions, consent decrees and civil penalties;

 


 
·
customer notifications, voluntary or mandatory recall or seizure of our products;

 


 
·
operating restrictions, partial suspension or total shutdown of production;

 


 
·
delay in processing submissions or applications for new products or modifications to existing products;

 


 
·
withdrawing approvals that have already been granted; and

 


 
·
criminal prosecution.

 
The Medical Device Reporting laws
and regulations require us to provide information to the FDA when we receive or otherwise become aware of information that reasonably
suggests our device may have caused or contributed to a death or serious injury as well as a device malfunction that likely would cause
or contribute to death or serious injury if the malfunction were to recur. In addition, the FDA prohibits an approved device from being
marketed for off-label use. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label
uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial
monetary penalties and criminal prosecution.
 
Newly discovered or developed
safety or effectiveness data may require changes to a product’s labeling, including the addition of new warnings and contraindications,
and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting
from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory clearance or
approval of our products under development.
 
Healthcare Regulation 
 
In addition to the FDA’s
restrictions on marketing of pharmaceutical products, the U.S. healthcare laws and regulations that may affect our ability to operate
include: the federal fraud and abuse laws, including the federal anti-kickback and false claims laws; federal data privacy and security
laws; and federal transparency laws related to payments and/or other transfers of value made to physicians (defined to include doctors,
dentists, optometrists, podiatrists and chiropractors) and other healthcare professionals (such as physicians assistants and nurse practitioners)
and teaching hospitals. Many states have similar laws and regulations that may differ from each other and federal law in significant ways,
thus complicating compliance efforts. For example, states have anti-kickback and false claims laws that may be broader in scope than analogous
federal laws and may apply regardless of payor. In addition, state data privacy laws that protect the security of health information may
differ from each other and may not be preempted by federal law. Moreover, several states have enacted legislation requiring pharmaceutical
manufacturers to, among other things, establish marketing compliance programs, file periodic reports with the state, make periodic public
disclosures on sales and marketing activities, report information related to drug pricing, require the registration of sales representatives,
and prohibit certain other sales and marketing practices. These laws may adversely affect our sales, marketing and other activities with
respect to any product candidate for which we receive approval to market in the United States by imposing administrative and compliance
burdens on us.
 
Because of the breadth of these
laws and the narrowness of available statutory exceptions and regulatory safe harbors, it is possible that some of our business activities,
particularly any sales and marketing activities after a product candidate has been approved for marketing in the United States, could
be subject to legal challenge and enforcement actions. If our operations are found to be in violation of any of the federal and state
laws described above or any other governmental regulations that apply to us, we may be subject to significant civil, criminal, and administrative
penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs,
additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations
of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability
to operate our business and our results of operations.
  
 
 


 12 
 

 
From time to time, legislation
is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture
and marketing of regulated products or the reimbursement thereof. For example, in the United States, the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, ACA, among other things, reduced and/or
limited Medicare reimbursement to certain providers and imposed an annual excise tax of 2.3% on any entity that manufactures or imports
medical devices offered for sale in the United States, with limited exceptions. However, the 2020 federal spending package permanently
eliminated, effective January 1, 2020, this ACA-mandated medical device tax. On June 17, 2021, the U.S. Supreme Court dismissed a challenge
on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed
by Congress. Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or IRA, into law, which among other
things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The
IRA also eliminates the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary
maximum out-of-pocket cost and creating a new manufacturer discount program. It is possible that the ACA will be subject to judicial or
congressional challenges in the future. It is unclear how such challenges and any additional healthcare reform measures will impact the
ACA.
 
Other legislative changes have
been proposed and adopted since the ACA was enacted. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces
Medicare’s payments to providers by two percent through fiscal year 2032. These reductions may reduce providers’ revenues
or profits, which could affect their ability to purchase new technologies. Furthermore, the healthcare industry in the United States has
experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment
rates and negotiating reduced contract rates with service providers. In July 2021, the Biden Administration released an executive order,
“Promoting Competition in the American Economy,” which contained provisions relating to prescription drugs. On September 9,
2021, in response to this executive order, the U.S. Department of Health and Human Services, or HHS, released a Comprehensive Plan for
Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies
that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. Further, the IRA, among
other things (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare
and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions
will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. HHS has and will continue
to issue and update guidance as these programs are implemented. It is currently unclear how the IRA will be implemented but is likely
to have a significant impact on the pharmaceutical industry. In addition, in response to the Biden administration’s October 2022
executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid
Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It
is unclear whether the models will be utilized in any health reform measures in the future.
 
Legislation could be adopted in
the future that limits payments for our products from governmental payors. In addition, commercial payors such as insurance companies,
could adopt similar policies that limit reimbursement for medical device manufacturers’ products.
 
Coverage and Reimbursement
 
In both the U.S. and international
markets, the use of medical devices is dependent in part on the availability of reimbursement from third-party payors, such as government
and private insurance plans. Healthcare providers that use medical devices generally rely on third-party payors to pay for all or part
of the costs and fees associated with the medical procedures being performed or to compensate them for their patient care services. Should
our Hemopurifier or any other products under development be approved for commercialization by the FDA, any such products may not be
considered cost-effective, reimbursement may not be available in the United States or other countries, if approved, and reimbursement
may not be sufficient to allow sales of our future products on a profitable basis. The coverage decisions of third-party payors will be
significantly influenced by the assessment of our future products by health technology assessment bodies. If approved for use in the United
States, we expect that any products that we develop, including the Hemopurifier, will be purchased primarily by medical institutions,
which will in turn bill various third-party payors for the health care services provided to patients at their facility. Payors may include
the Centers for Medicare & Medicaid Services, or CMS, which administers the Medicare program and works in partnership with state governments
to administer Medicaid, other government programs and private insurance plans. The process involved in applying for coverage and reimbursement
from CMS is lengthy and expensive. Further, Medicare coverage is based on our ability to demonstrate that the treatment is “reasonable
and necessary” for Medicare beneficiaries. Even if products utilizing our Hemopurifier technology receive FDA and other regulatory
clearance or approval, they may not be granted coverage and reimbursement by any payor, including by CMS. Many private payors use coverage
decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement policies and amounts. However,
no uniform policy for coverage and reimbursement for medical devices exists among third-party payors in the United States. Therefore,
coverage and reimbursement can differ significantly from payor to payor.
 
 
 


 13 
 

 
Manufacturing
 
Historically, manufacturing of
our Hemopurifier occurred in collaboration with a contract manufacturer based in California under current Good Manufacturing Practice,
or cGMP, regulations promulgated by the FDA. Our contract manufacturer is registered with the FDA. To date, our manufacture of the
Hemopurifier has been limited to quantities necessary to support our clinical studies.
 
In May 2024, the FDA approved the use of our own manufacturing
facility to manufacture Hemopurifiers.
 
Our costs of compliance with federal, state and local
environmental laws have been immaterial to date.
 
Sources and Availability of Raw Materials and the Names of
Principal Suppliers 
 
Aethlon personnel assemble the
various components of the Hemopurifier with materials from our various suppliers, which are purchased and released by Aethlon. Specifically,
the Hemopurifier contains three critical components with limited available suppliers. The GNA lectin is sourced from Vector Laboratories
Inc. and also is available from other suppliers. Our intended transition from Vector Laboratories to a new supplier for GNA is delayed
as we work with the FDA for approval of our supplement to our IDE, which is required to make this manufacturing change. The base cartridge
on which the Hemopurifier is constructed is sourced from Medica S.p.A and we are dependent on the continued availability of these cartridges.
Although there are other suppliers, the process of qualifying a new supplier takes time and regulatory approvals must be obtained. We
currently purchase the diatomaceous earth from Janus Scientific, Inc., as the distributor; however, the product is manufactured by Imerys
Minerals Ltd. There potentially are other suppliers of this product, but as with the cartridges, qualifying and obtaining required regulatory
approvals takes time and resources.
  
Sales and Marketing
 
We do not currently have any sales
and marketing capability. With respect to commercialization efforts in the future, we intend to build or contract for distribution, sales
and marketing capabilities for any product candidate that is approved. From time to time, we have had and are having strategic discussions
with potential collaboration partners for our product candidates, although no assurance can be given that we will be able to enter into
one or more collaboration agreements for our product candidates on acceptable terms, if at all.
  
Product Liability
 
The risk of product liability
claims, product recalls and associated adverse publicity is inherent in the testing, manufacturing, marketing and sale of medical products.
We have limited clinical trial liability insurance coverage. It is possible that future insurance coverage may not be adequate or available.
We may not be able to secure product liability insurance coverage on acceptable terms or at reasonable costs when needed. Any liability
for mandatory damages could exceed the amount of our coverage. A successful product liability claim against us could require us to pay
a substantial monetary award. Moreover, a product recall could generate substantial negative publicity about our products and business
and inhibit or prevent commercialization of other future product candidates.
 
Employees
 
As of June 25, 2024, we had 14
full-time employees and no part-time employees. All of our employees are located in the United States. We do intend to hire additional
employees. We utilize, whenever appropriate, consultants in order to conserve cash and resources.
 
We believe our employee relations
are good. None of our employees are represented by a labor union or are subject to collective-bargaining agreements.
 
 
 


 14 
 

 
ITEM 1A. RISK FACTORS
 
An investment in our securities
involves a high degree of risk. You should carefully consider the risks described below as well as the other information in this Annual
Report before deciding to invest in or maintain your investment in our company. The risks described below are not intended to be an all-inclusive
list of all of the potential risks relating to an investment in our securities. Any of the risk factors described below could significantly
and adversely affect our business, prospects, financial condition and results of operations. Additional risks and uncertainties not currently
known or that are currently considered to be immaterial may also materially and adversely affect our business. As a result, the trading
price or value of our securities could be materially adversely affected and you may lose all or part of your investment.
 
Risks Relating to Our Financial Position and Need for Additional Capital
 
We have incurred significant losses and expect to continue to incur
losses for the foreseeable future.
We have
never been profitable. We have generated revenues during the fiscal years ended March 31, 2024 and March 31, 2023 in the amounts of $0
and $574,245, respectively, primarily from our contract with the NIH, which ended in September 2022. We do not currently have any research
grants or contracts. It is possible that we may not be able to enter into future government contracts. Future profitability, if any, will
require the successful commercialization of our Hemopurifier technology or any other product that we develop or from additional government
contract or grant income we may obtain. We may not be able to successfully commercialize the Hemopurifier or any other products, and even
if commercialization is successful, we may never be profitable. While we currently have over $9.1 million in cash and cash equivalents
and have been carrying out certain expense reductions since November 2023, our planned additional expense reductions may not materialize
and/or our patient recruitment may occur more rapidly than expected along with the concomitant increases in expenses; therefore there
is substantial doubt that our cash on hand will carry the company for 12 months beyond the filing date of the financial statements included
in this Annual Report.
We do plan to access the equity
markets for additional capital, however, there can be no assurance that we will be able to access such additional capital.
 
We will require additional financing to sustain our operations, achieve
our business objectives and satisfy our cash obligations, which may dilute the ownership of our existing stockholders.
 
We will require significant additional
financing for our operations and for expected additional future clinical trials in the United States, India and Australia, regulatory
clearances, and continued research and development activities for the Hemopurifier and other future products. In addition, as we expand
our activities, our overhead costs to support personnel, laboratory materials and infrastructure will increase. We may also choose to
raise additional funds in debt or equity financings if they are available to us on reasonable terms to increase our working capital and
to strengthen our financial position. Any sale of additional equity or convertible debt securities could result in dilution of the equity
interests of our existing stockholders. Additionally, new investors may require that we and certain of our stockholders enter into voting
arrangements that give them additional voting control or representation on our Board of Directors. If required financing is unavailable
to us on reasonable terms, or at all, we may be unable to support our operations, including our research and development activities, which
would have a material adverse effect on our ability to commercialize our products or continue our business.
 
Our ability to raise additional
funds may be adversely impacted by our ability to remain listed on Nasdaq, the potential worsening global economic conditions and disruptions
to and volatility in the credit and financial markets in the United States, including due to bank
failures, actual or perceived changes in interest rates and economic inflation, and worldwide resulting from macroeconomic factors.
Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased
expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
 
 
 


 15 
 

 
Risks Related to Our Business Operations
 
Delays, interruptions or the cessation of production
by our third-party suppliers of important materials or delays in qualifying new materials, has and may continue to prevent or delay our
ability to manufacture our Hemopurifier.
 
Most of the raw materials used
in the process for manufacturing our Hemopurifier are available from more than one supplier. However, there are materials within the manufacturing
and production process that come from single suppliers. We do not have written contracts with all of our single source suppliers, and
at any time they could stop supplying our orders. FDA review of a new supplier is required if these materials become unavailable from
our current suppliers. In the recent past, we experienced an interruption in the manufacturing of our Hemopurifier as we sought to transition
to a new supplier of galanthus nivalis agglutinin, or GNA, used in the manufacture of our Hemopurifier. We have not received the required
FDA approval of our IDE supplement for a new qualified supplier of the GNA and are working with the FDA to gain approval of this supplier.
Although we have resumed purchasing GNA from our prior supplier, it is possible that we could experience future disruptions from this
supplier as we work to qualify a second supplier. FDA review of the new second supplier could take several additional months to obtain.
 
In addition, an uncorrected impurity,
a supplier’s variation in a raw material or testing, either unknown to us or incompatible with its manufacturing process, or any
other problem with our materials, testing or components, would prevent or delay the release of our Hemopurifiers for use in our clinical
trials. For example, in late 2020, we identified during our device quality review procedures prior to product release that one of our
critical suppliers had produced a Hemopurifier component that was not produced to our specifications, although no affected Hemopurifiers
were released into our inventory or to any clinical trial sites. Any such future supplier issues could have a material adverse impact
on our business, results of operations and financial condition.
 
Difficulties in manufacturing our Hemopurifier
could have an adverse effect upon our expenses, our product revenues and our ability to complete our clinical trials.
 
We only recently received approval
from the FDA for our IDE supplement to manufacture Hemopurifiers at our site in San Diego. The manufacturing of our Hemopurifier is difficult
and complex. To support our current clinical trial needs, we comply with and intend to continue to comply with cGMP in the manufacture
of our product. Our ability to adequately manufacture and supply our Hemopurifier in a timely matter is dependent on the uninterrupted
and efficient operation of our facilities and those of third parties producing raw materials and supplies upon which we rely in our manufacturing.
The manufacture of our products may also be impacted by:
 


 
·
availability or contamination of raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier;

 


 
·
our ability to comply with new regulatory requirements, including our ability to comply with cGMP;

 


 
·
natural disasters;

 


 
·
changes in forecasts of future demand for product components;

 


 
·
potential facility contamination by microorganisms or viruses;

 


 
·
updating of manufacturing specifications;

 


 
·
product quality success rates and yields; and

 


 
·
global viruses and pandemics.

 
 
 


 16 
 

 
Any future interruption in the
manufacture and supply of our Hemopurifier could delay shipments of our Hemopurifier for use in clinical trials in the United States,
Australia and India.
 
Our products are manufactured
with raw materials that are sourced from specialty suppliers with limited competitors and we may therefore be unable to access the materials
we need to manufacture our products.
 
Specifically, the Hemopurifier
contains three critical components with limited supplier numbers. The base cartridge on which the Hemopurifier is constructed is sourced
from Medica S.p.A and we are dependent on the continued availability of these cartridges. We currently purchase the diatomaceous earth
from Janus Scientific Inc., our distributor; however, the product is manufactured by Imerys Minerals Ltd., which is the only supplier
of this product. The GNA is sourced from Vector Laboratories, Inc. and also is available from other suppliers; however, Sigma Aldrich
is our only back up supplier at this time and we are in the process of working with the FDA to obtain regulatory approval for this supplier.
A business interruption at any of these sources, including the interruption resulting from the delay in obtaining FDA approval of our
new GNA supplier, has and may continue to have a material impact on our ability to manufacture the Hemopurifier.
 
We face intense competition in the medical device industry.
 
We compete with numerous U.S.
and foreign companies in the medical device industry, and many of our competitors have greater financial, personnel, operational and research
and development resources than we do. We believe that because the field of exosome research is burgeoning, multiple competitors are or
will be developing competing technologies to address exosomes in cancer. Progress is constant in the treatment and prevention of viral
diseases, so the opportunities for the Hemopurifier may be reduced there as well. Diagnostic technology may be developed that can supplant
diagnostics we are developing for viruses and cancer. Our commercial opportunities will be reduced or eliminated if our competitors develop
and market products for any of the diseases we target that:
 


 
·
are more effective;

 


 
·
have fewer or less severe adverse side effects;

 


 
·
are better tolerated;

 


 
·
are more adaptable to various modes of dosing;

 


 
·
are easier to administer; or

 


 
·
are less expensive than the products or product candidates we are developing.

 
Even if we are successful in developing
the Hemopurifier and obtain FDA and other regulatory approvals necessary for commercialization, our products may not compete effectively
with other successful products. Researchers are continually learning more about diseases, which may lead to new technologies for treatment.
Our competitors may succeed in developing and marketing products that are either more effective than those that we may develop, alone
or with our collaborators, or that are marketed before any products we develop are marketed. Our competitors include fully integrated
pharmaceutical companies and biotechnology companies as well as universities and public and private research institutions. Many of the
organizations competing with us have substantially greater capital resources, larger research and development staffs and facilities, greater
experience in product development and in obtaining regulatory approvals, and greater marketing capabilities than we do. If our competitors
develop more effective pharmaceutical treatments for infectious disease or cancer, or bring those treatments to market before we can commercialize
the Hemopurifier for such uses, we may be unable to obtain any market traction for our products, or the diseases we seek to treat may
be substantially addressed by competing treatments. If we are unable to successfully compete against larger companies in the pharmaceutical
industry, we may never generate significant revenue or be profitable.
  
 
 


 17 
 

 
We have limited experience in identifying and working with large-scale
contracts with medical device manufacturers; manufacture of our devices must comply with good manufacturing practices in the United States.
 
To achieve the levels of production
necessary to commercialize our Hemopurifier and any other future products, we will need to secure large-scale manufacturing agreements
with contract manufacturers which comply with good manufacturing practice standards and other standards prescribed by various federal,
state and local regulatory agencies in the United States and any other country of use. We have limited experience coordinating and overseeing
the manufacture of medical device products on a large-scale. It is possible that manufacturing and control problems will arise as we attempt
to commercialize our products and that manufacturing may not be completed in a timely manner or at a commercially reasonable cost. In
addition, we may not be able to adequately finance the manufacture and distribution of our products on terms acceptable to us, if at all.
If we cannot successfully oversee and finance the manufacture of our products if they obtain regulatory clearances, we may never generate
revenue from product sales and we may never be profitable.
 
Our Hemopurifier technology may become obsolete.
 
Our Hemopurifier product may be
made unmarketable prior to commercialization by us by new scientific or technological developments by others with new treatment modalities
that are more efficacious and/or more economical than our products. The homeland security industry is growing rapidly with many competitors
that are trying to develop products or vaccines to protect against infectious disease. Any one of our competitors could develop a more
effective product which would render our technology obsolete. Further, our ability to achieve significant and sustained penetration of
our key target markets will depend upon our success in developing or acquiring technologies developed by other companies, either independently,
through joint ventures or through acquisitions. If we fail to develop or acquire, and manufacture and sell, products that satisfy our
customers’ demands, or we fail to respond effectively to new product announcements by our competitors by quickly introducing competitive
products, then market acceptance of our products could be reduced and our business could be adversely affected. Our products may not remain
competitive with products based on new technologies.
  
We are highly dependent on our key personnel, and if we are not successful
in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
 
Our ability to compete in the
highly competitive biotechnology and medical device industries depends upon our ability to attract and retain highly qualified managerial,
scientific, and medical personnel. We are highly dependent on our management, scientific, and medical personnel. The loss of the services
of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business,
prospects, financial condition or results of operations.
 
We do not currently carry key
man life insurance policies on any of our key executive officers which would assist us in recouping our costs in the event of the loss
of those officers. If any of our key officers were to leave us, it could make it impossible, if not cause substantial delays and costs,
to implement our long-term business objectives and growth.
 
Our inability to attract and retain qualified
personnel could impede our ability to achieve our business objectives.
 
We have 14 full-time employees.
We utilize, whenever appropriate, consultants in order to conserve cash and resources. Although we believe that these employees and
consultants will be able to handle most of our additional administrative, research and development and business development in the near
term, we will nevertheless be required over the longer-term to hire highly skilled managerial, scientific and administrative personnel
to fully implement our business plan and growth strategies. Due to the specialized scientific nature of our business, we are highly dependent
upon our ability to attract and retain qualified scientific, technical and managerial personnel. Competition for these individuals, especially
in San Diego, California, where many biotechnology companies are located, is intense and we may not be able to attract, assimilate or
retain additional highly qualified personnel in the future. We may not be able to engage the services of qualified personnel at competitive
prices or at all, particularly given the risks of employment attributable to our limited financial resources and lack of an established
track record. Also, if we are required to attract personnel from other parts of the U.S. or abroad, we may have significant difficulty
doing so due to the high cost of living in the Southern California area and due to the costs incurred with transferring personnel to the
area. If we cannot attract and retain qualified staff and executives, we will be unable to develop our products and achieve regulatory
clearance, and our business could fail.
 
 
 


 18 
 

 
We plan to expand our operations, which may
strain our resources; our inability to manage our growth could delay or derail implementation of our business objectives.
 
We will need to significantly
expand our operations to implement our longer-term business plan and growth strategies. We will also be required to manage multiple relationships
with various strategic partners, technology licensors, customers, manufacturers and suppliers, consultants and other third parties. This
expansion and these expanded relationships will require us to significantly improve or replace our existing managerial, operational and
financial systems, procedures and controls; to improve the coordination between our various corporate functions; and to manage, train,
motivate and maintain a growing employee base. The time and costs to effectuate these steps may place a significant strain on our management
personnel, systems and resources, particularly given the limited amount of financial resources and skilled employees that may be available
at the time. We may not be able to institute, in a timely manner or at all, the improvements to our managerial, operational and financial
systems, procedures and controls necessary to support our anticipated increased levels of operations and to coordinate our various corporate
functions, or that we will be able to properly manage, train, motivate and retain our anticipated increased employee base. If we cannot
manage our growth initiatives, including our expansion of our clinical trials in India and potentially in other countries, we will be
unable to commercialize our products on a large-scale in a timely manner, if at all, and our business could fail.
 
We do not have any experience in the organ transplant market and
face competition from entities more familiar with this business and our efforts may not succeed.
 
We are investigating whether
the Hemopurifier, when incorporated into a machine perfusion organ preservation circuit, can remove harmful viruses, exosomes, RNA molecules,
cytokines, chemokines and other inflammatory molecules from recovered organs. This area is new to our product development and management
personnel, and we may not be successful in the organ transplant market where we do not have any experience. Even if we are successful
in developing our Hemopurifier for the organ transplant market, we may not be able to compete effectively or generate significant revenues
in this new area. Many companies of all sizes, including major pharmaceutical companies, specialized biotechnology companies, and traditional
healthcare providers, are engaged in redesigning organ transplant care. Competitors operating in this area may have substantially greater
financial and other resources, larger research and development staff, and more experience in this area. It is possible that, even if we
are successful in the organ transplant field, that the market will not accept our product, or that our product will generate significant
revenues for us.
 
As a public company with limited financial resources undertaking
the launch of new medical technologies, we may have difficulty attracting and retaining executive management and directors.
 
The directors and management of
publicly traded corporations are increasingly concerned with the extent of their personal exposure to lawsuits and stockholder claims,
as well as governmental and creditor claims which may be made against them, particularly in view of recent changes in securities laws
imposing additional duties, obligations and liabilities on management and directors. Due to these perceived risks, directors and management
are also becoming increasingly concerned with the availability of directors’ and officers’ liability insurance to pay on a
timely basis the costs incurred in defending such claims. While we currently carry directors’ and officers’ liability insurance,
such insurance is expensive and could be difficult to maintain in the future. If we are unable to continue or provide directors’
and officers’ liability insurance at affordable rates or at all, it may become increasingly more difficult to attract and retain
qualified outside directors to serve on our Board of Directors. We may lose potential independent board members and management candidates
to other companies in the biotechnology field that have greater directors’ and officers’ liability insurance to insure them
from liability or to biotechnology companies that have revenues or have received greater funding to date which can offer greater compensation
packages. The fees of directors are also rising in response to their increased duties, obligations and liabilities. In addition, our products
could potentially be harmful to users, and we are exposed to claims of product liability including for injury or death. We have limited
insurance and may not be able to afford robust coverage even as our products are introduced into the market. As a company with limited
resources and potential exposures to management, we will have a more difficult time attracting and retaining management and outside independent
directors than a more established public or private company due to these enhanced duties, obligations and potential liabilities.
 
 
 


 19 
 

 
If we fail to comply with extensive regulations
of U.S. and foreign regulatory agencies, the commercialization of our products could be delayed or prevented entirely.
 
Our Hemopurifier product is subject
to extensive government regulations related to development, testing, manufacturing and commercialization in the United States and other
countries. The determination of when and whether a product is ready for large-scale purchase and potential use will be made by the U.S.
Government through consultation with a number of governmental agencies, including the FDA, the National Institutes of Health, the CDC
and the Department of Homeland Security. Our Hemopurifier has not received required regulatory approval from the FDA, or any foreign regulatory
agencies, to be commercially marketed and sold. The process of obtaining and complying with FDA and other governmental regulatory approvals
and regulations in the United States and in foreign countries is costly, time consuming, uncertain and subject to unanticipated delays.
Obtaining such regulatory approvals, if any, can take several years. Despite the time and expense exerted, regulatory approval is never
guaranteed. We also are subject to the following risks and obligations, among others:
  


 
·
the FDA may refuse to approve an application if it believes that applicable regulatory criteria are not satisfied;

 


 
·
the FDA may require additional testing for safety and effectiveness;

 


 
·
the FDA may interpret data from pre-clinical testing and clinical trials in different ways than we interpret them;

 


 
·
if regulatory approval of a product is granted, the approval may be limited to specific indications or limited with respect to its distribution; and

 


 
·
the FDA may change its approval policies and/or adopt new regulations.

 
Failure to comply with these or
other regulatory requirements of the FDA may subject us to administrative or judicially imposed sanctions, including:
 


 
·
warning letters;

 


 
·
civil penalties;

 


 
·
criminal penalties;

 


 
·
injunctions;

 


 
·
product seizure or detention;

 


 
·
product recalls; and

 


 
·
total or partial suspension of productions.

 
 
 
 
 


 20 
 

 
Delays in successfully commencing or completing
our planned clinical trials could jeopardize our ability to obtain regulatory approval and sustain our operations.
 
Our business prospects depend
on our ability to complete studies, commence and complete our planned clinical trials, including our ongoing and planned studies in solid
tumors in cancer, obtain satisfactory results, obtain required regulatory approvals and successfully commercialize our Hemopurifier product
candidate. Completion of our clinical trials, announcement of results of the trials and our ability to obtain regulatory approvals could
be delayed for a variety of reasons, including:
 


 
·

failure to obtain required approvals to commence our planned clinical trials;



 
 
 

 
·
slow patient enrollment in our planned clinical trials;

 


 
·
serious adverse events related to our Hemopurifier;

 


 
·
unsatisfactory results of any clinical trial;

 


 
·
the failure of our principal third-party investigators to perform our clinical trials on our anticipated schedules; and

 


 
·
different interpretations of our pre-clinical and clinical data, which could initially lead to inconclusive results.

 
Our development costs will increase
if we have material delays in any clinical trial or if we need to perform more or larger clinical trials than planned. If the delays are
significant, or if any of our product candidates do not prove to be safe or effective or do not receive required regulatory approvals,
our financial results and the commercial prospects for our product candidates will be harmed. Furthermore, our inability to complete our
clinical trials in a timely manner could jeopardize our ability to obtain regulatory approval for our Hemopurifier or any other potential
product candidates.
  
If we or our suppliers fail to comply with ongoing
FDA or foreign regulatory authority requirements, or if we experience unanticipated problems with our products, these products could be
subject to restrictions or withdrawal from the market.
 
Any product for which we obtain
clearance or approval, if any, and the manufacturing processes, reporting requirements, post-approval clinical data and promotional activities
for such product, will be subject to continued regulatory review, oversight and periodic inspections by the FDA and other domestic and
foreign regulatory bodies. In particular, we and our third-party suppliers may be required to comply with the FDA’s Quality System
Regulation, or QSR. These FDA regulations cover the methods and documentation of the design, testing, production, control, quality assurance,
labeling, packaging, sterilization, storage and shipping of our products. Compliance with applicable regulatory requirements is subject
to continual review and is monitored rigorously through periodic inspections by the FDA. If we, or our manufacturers, fail to adhere to
QSR requirements in the United States, this could delay production of our products and lead to fines, difficulties in obtaining regulatory
clearances, recalls, enforcement actions, including injunctive relief or consent decrees, or other consequences, which could, in turn,
have a material adverse effect on our financial condition or results of operations.
 
In addition, the FDA assesses
compliance with the QSR through periodic announced and unannounced inspections of manufacturing and other facilities. The failure by us
or one of our suppliers to comply with applicable statutes and regulations administered by the FDA, or the failure to timely and adequately
respond to any adverse inspectional observations or product safety issues, could result in any of the following enforcement actions:
 
 
 


 21 
 

 


 
·
untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;

 
 
 

 
·
unanticipated expenditures to address or defend such actions;

 
 
 

 
·
customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;

 
 
 

 
·
operating restrictions or partial suspension or total shutdown of production;

 
 
 

 
·
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;

 
 
 

 
·
withdrawing 510(k) clearances or premarket approvals that have already been granted;

 
 
 

 
·
refusal to grant export approval for our products; or

 
 
 

 
·
criminal prosecution.

 
Moreover, the FDA strictly regulates
the promotional claims that may be made about approved products. In particular, a product may not be promoted for uses that are not approved
by the FDA as reflected in the product’s approved labeling. However, companies may share truthful and not misleading information
that is otherwise consistent with a product’s FDA approved labeling. The FDA and other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to
significant civil, criminal and administrative penalties.
 
Any of these sanctions could have
a material adverse effect on our reputation, business, results of operations and financial condition. Furthermore, our key component suppliers
may not currently be or may not continue to be in compliance with all applicable regulatory requirements, which could result in our failure
to produce our products on a timely basis and in the required quantities, if at all.
 
If our products, or malfunction of our products,
cause or contribute to a death or a serious injury, we will be subject to medical device reporting regulations, which can result in voluntary
corrective actions or agency enforcement actions.
 
Under the FDA medical device reporting
regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed
to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction
of the device or one of our similar devices were to recur. If we fail to report these events to the FDA within the required timeframes,
or at all, the FDA could take enforcement action against us. Any such adverse event involving our products also could result in future
voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any
corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time
and capital, distract management from operating our business, and may harm our reputation and financial results.
 
We outsource many of our operational and development
activities, and if any party to which we have outsourced certain essential functions fails to perform its obligations under agreements
with us, the development and commercialization of our Hemopurifier product candidate and any future product candidates that we may develop
could be delayed or terminated.
 
We rely on third-party consultants
or other vendors to manage and implement much of the day-to-day conduct of our clinical trials and the manufacturing our Hemopurifier
product candidate. Accordingly, we are and will continue to be dependent on the timeliness and effectiveness of the efforts of these third
parties. Our dependence on third parties includes key suppliers and third-party service providers supporting the development, manufacture
and regulatory approval of our Hemopurifier, as well as support for our information technology systems and other infrastructure. While
our management team oversees these vendors, failure of any of these third parties to meet their contractual, regulatory and other obligations
or the development of factors that materially disrupt the performance of these third parties could have a material adverse effect on our
business. For example, all of the key oversight responsibilities for the development and manufacture of our Hemopurifier are conducted
by our management team, but all other activities are the responsibility of third-party vendors.
 
 
 


 22 
 

 
If a clinical research organization
that we utilize is unable to allocate sufficient qualified personnel to our studies in a timely manner or if the work performed by it
does not fully satisfy the requirements of the FDA or other regulatory agencies, we may encounter substantial delays and increased costs
in completing our development efforts. Any manufacturer that we select may encounter difficulties in the manufacture of new products in
commercial quantities, including problems involving product yields, product stability or shelf life, quality control, adequacy of control
procedures and policies, compliance with FDA regulations and the need for further FDA approval of any new manufacturing processes and
facilities. If any of these occur, the development and commercialization of our Hemopurifier product candidate could be delayed, curtailed
or terminated, because we may not have sufficient financial resources or capabilities to continue such development and commercialization
on our own.
  
If we or our contractors or service providers
fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which could affect our ability
to develop, market and sell our Hemopurifier product candidate and any other future product candidates that we may develop, if any, and
may harm our reputation.
 
If we or our manufacturers or
other third-party contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to regulatory
actions, which could affect our ability to successfully develop, market and sell our Hemopurifier product candidate or any future product
candidates, if any, and could harm our reputation and lead to reduced or non-acceptance of our proposed product candidates by the market.
Even technical recommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology
companies may make the manufacturing of a clinical product extremely labor intensive or expensive, making the product candidate no longer
viable to manufacture in a cost-efficient manner. The mode of administration may make the product candidate not commercially viable. The
required testing of the product candidate may make that candidate no longer commercially viable. The conduct of clinical trials may be
critiqued by the FDA, or a clinical trial site’s IRB or Institutional Biosafety Committee, which may delay or make impossible clinical
testing of a product candidate. The IRB for a clinical trial may stop a trial or deem a product candidate unsafe to continue testing.
This would have a material adverse effect on the value of the product candidate and our business prospects.
 
We will need to outsource and rely on third
parties for the clinical development, sales and marketing of our Hemopurifier or any future product candidates that we may develop, and
our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.
 
We do not have the required financial
and human resources to carry out on our own all the pre-clinical and clinical development for our Hemopurifier product candidate or any
other or future product candidates that we may develop, and do not have the capability and resources to market or sell our Hemopurifier
product candidate or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of
the clinical and other development, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs
as a means of potentially improving our financial position. Our success will depend on the performance of these outsourced providers.
If these providers fail to perform adequately, our development of product candidates may be delayed and any delay in the development of
our product candidates would have a material and adverse effect on our business prospects.
 
We are and will be exposed to product liability
risks, and clinical and preclinical liability risks, which could place a substantial financial burden upon us should we be sued.
 
Our business exposes us to potential
product liability and other liability risks that are inherent in the testing, manufacturing and marketing of medical devices. Claims may
be asserted against us. A successful liability claim or series of claims brought against us could have a material adverse effect on our
business, financial condition and results of operations. We may not be able to continue to obtain or maintain adequate product liability
insurance on acceptable terms, if at all, and such insurance may not provide adequate coverage against potential liabilities. Claims or
losses in excess of any product liability insurance coverage that we may obtain could have a material adverse effect on our business,
financial condition and results of operations.
 
 
 


 23 
 

 
Our Hemopurifier product candidate
may be used in connection with medical procedures in which it is important that those products function with precision and accuracy. If
our product candidates, including our Hemopurifier, do not function as designed, or are designed improperly, we may be forced by regulatory
agencies to withdraw such products from the market. In addition, if medical personnel or their patients suffer injury as a result of any
failure of our products to function as designed, or our products are designed inappropriately, we may be subject to lawsuits seeking significant
compensatory and punitive damages. The risk of product liability claims, product recalls and associated adverse publicity is inherent
in the testing, manufacturing, marketing and sale of medical products. We have obtained general clinical trial liability insurance coverage.
However, our insurance coverage may not be adequate or available. We may not be able to secure product liability insurance coverage on
acceptable terms or at reasonable costs when needed. Any product recall or lawsuit seeking significant monetary damages may have a material
effect on our business and financial condition. Any liability for mandatory damages could exceed the amount of our coverage. Moreover,
a product recall could generate substantial negative publicity about our products and business and inhibit or prevent commercialization
of other future product candidates.
  
We have not received, and may never receive,
approval from the FDA to market a medical device in the United States.
 
Before a new medical device can
be marketed in the United States, it must first receive a PMA or 510(k) clearance from the FDA, unless an exemption applies. A PMA submission,
which is a higher standard than a 510(k) clearance, is used to demonstrate to the FDA that a new or modified device is safe and effective.
The 510(k) is used to demonstrate that a device is “substantially equivalent” to a predicate device, that is, one that has
been cleared by the FDA. We expect that any product we seek regulatory approval for, including the Hemopurifier, will require a PMA. The
FDA approval process involves, among other things, successfully completing clinical trials and filing for and obtaining a PMA. The PMA
process requires us to prove the safety and effectiveness of our products to the FDA’s satisfaction. This process, which includes
preclinical studies and clinical trials, can take many years and requires the expenditure of substantial resources and may include post-marketing
surveillance to establish the safety and efficacy of the product. Notwithstanding the effort and expense incurred, the process may never
result in the FDA granting a PMA. Data obtained from preclinical studies and clinical trials are subject to varying interpretations that
could delay, limit or prevent regulatory approval. Delays or rejections may also be encountered based upon changes in governmental policies
for medical devices during the period of product development. The FDA can delay, limit or deny approval of a PMA application for many
reasons, including:
 


 
·
our inability to demonstrate safety or effectiveness of the Hemopurifier, or any other product we develop, to the FDA’s satisfaction;

 


 
·
insufficient data from our preclinical studies and clinical trials, including for our Hemopurifier, to support approval;

 


 
·
failure of the facilities of our third-party manufacturer or suppliers to meet applicable requirements;

 


 
·
inadequate compliance with preclinical, clinical or other regulations;

 


 
·
our failure to meet the FDA’s statistical requirements for approval; and

 


 
·
changes in the FDA’s approval policies, or the adoption of new regulations that require additional data or additional clinical trials.

 
Modifications to products that
are approved through a PMA application generally need FDA approval. Similarly, some modifications made to products cleared through a 510(k)
may require a new 510(k). The FDA’s 510(k) clearance process usually takes from three to 12 months, but may last longer. The process
of obtaining a PMA is much costlier and more uncertain than the 510(k) clearance process and generally takes from one to three years,
or even longer, from the time the application is submitted to the FDA until an approval is obtained. Any of our products considered to
be a class III device, which are considered to pose the greatest risk and the approval of which is governed by the strictest guidelines,
will require the submission and approval of a PMA in order for us to market it in the United States. We also may design new products in
the future that could require the clearance of a 510(k).
 
 
 


 24 
 

 
Although we have received approval
to proceed with clinical trials of the Hemopurifier in the United States under the investigational device exemption, the current approval
from the FDA to proceed could be revoked, the study could be unsuccessful, or the FDA PMA approval may not be obtained or could be revoked.
Even if we obtain approval, the FDA or other regulatory authorities may require expensive or burdensome post-market testing or controls.
Any delay in, or failure to receive or maintain, clearance or approval for our future products could prevent us from generating revenue
from these products or achieving profitability. Additionally, the FDA and other regulatory authorities have broad enforcement powers.
Regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some physicians from using our products and adversely
affect our reputation and the perceived safety and efficacy of our products.
 
The approval requirements for medical products
used to fight bioterrorism and pandemics are still evolving, and any products we develop for such uses may not meet these requirements.
 
We are advancing product candidates
under governmental policies that regulate the development and commercialization of medical treatment countermeasures against bioterror
and pandemic threats. While we intend to pursue FDA market clearance to treat infectious bioterror and pandemic threats, it is often
not feasible to conduct human studies against these deadly high threat pathogens. For example, the Hemopurifier is an investigational
device that has not yet received FDA approval for any indication. We continue to investigate the potential for the use of the Hemopurifier
in viral diseases under an open IDE and our FDA Breakthrough Designation for “…the treatment of life-threatening glycosylated
viruses that are not addressed with an approved therapy.” We currently have an open FDA approved Expanded Access Protocol for the
treatment of Ebola infected patients in the United States and a corresponding HealthCanada approval in Canada. Based on our studies to
date, the Hemopurifier can potentially clear many viruses that are pathogenic in humans, including HCV, HIV, Monkeypox and Ebola.
 
For example, in June 2020, the
FDA approved a supplement to our open IDE for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier in patients
with SARS-CoV-2/COVID-19 in a New Feasibility Study. This study was designed to enroll up to 40
subjects at up to 20 centers in the United States. Subjects had to have an established laboratory diagnosis of COVID-19, be admitted to
an intensive care unit, or ICU, and have had acute lung injury and/or severe or life-threatening disease, among other criteria. Due
to lack of COVID-19 patients in the ICUs of our trial sites, we terminated this study in 2022.
 
As a result of the termination
of our COVID-19 study due to lack of patients in the ICUs, we were unable to demonstrate the effectiveness of our treatment countermeasures
through controlled human efficacy studies in this U.S. study. Additionally, a change in government policies could impair our ability to
obtain regulatory approval for the Hemopurifier.
 
The results of our clinical trials may not support our product candidate
claims or may result in the discovery of adverse side effects.
 
Any research and development,
pre-clinical testing and clinical trial activities involving our Hemopurifier and any additional products that we may develop are subject
to extensive regulation and review by numerous governmental authorities both in the United States and abroad. Clinical studies must be
conducted in compliance with FDA regulations or the FDA may take enforcement action. The data collected from these clinical studies may
ultimately be used to support market clearance for these products. Even if our clinical trials are completed as planned, the results of
these trials may not support our product candidate claims and the FDA may not agree with our conclusions regarding the trial results.
Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and the later
trials may not replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that
our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and
may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and,
ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical
trials will experience adverse side effects that are not currently part of the product candidate’s profile.
 
 
 


 25 
 

 
U.S. legislative or FDA regulatory reforms may
make it more difficult and costly for us to obtain regulatory approval of our product candidates and to manufacture, market and distribute
our products after approval is obtained.
 
From time to time, legislation
is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture
and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted
by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations
of existing regulations may impose additional costs or lengthen review times of future products. It is impossible to predict whether legislative
changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be on
our product development efforts.
 
Our current and future business activities are
subject to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security
and other healthcare laws and regulations, which could expose us to significant penalties.
 
We are currently and will in the
future be subject to healthcare regulation and enforcement by the U.S. federal government and the states in which we will conduct our
business if our product candidates are approved by the FDA and commercialized in the United States. In addition to the FDA’s restrictions
on marketing of approved products, the U.S. healthcare laws and regulations that may affect our ability to operate include: the federal
fraud and abuse laws, including the federal anti-kickback and false claims laws; federal data privacy and security laws; and federal transparency
laws related to payments and/or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists
and chiropractors) and other healthcare professionals (such as physicians assistants and nurse practitioners) and teaching hospitals.
Many states have similar laws and regulations that may differ from each other and federal law in significant ways, thus complicating compliance
efforts. These laws may adversely affect our sales, marketing and other activities with respect to any product candidate for which we
receive approval to market in the United States by imposing administrative and compliance burdens on us.
 
Because of the breadth of these
laws and the narrowness of available statutory exceptions and regulatory safe harbors, it is possible that some of our business activities,
particularly any sales and marketing activities after a product candidate has been approved for marketing in the United States, could
be subject to legal challenge and enforcement actions. If our operations are found to be in violation of any of the federal and state
laws described above or any other governmental regulations that apply to us, we may be subject to significant civil, criminal, and administrative
penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs,
additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations
of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability
to operate our business and our results of operations.
 
We and the third parties with whom we work are
subject to stringent and changing U.S. and foreign laws, rules, regulations and standards as well as policies, contracts and other obligations
related to data privacy and security. Our actual or perceived failure to comply with such obligations, or such failure by the third parties
with whom we work, could lead to regulatory investigations or actions, fines and penalties, a disruption of our clinical trials or commercialization
of our products, private litigation, including class claims, and mass arbitration demands, harm to our reputation, or other adverse effects
on our business or prospects. 
 
In the ordinary course of business,
we collect, receive, store, process, use, generate, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share,
or collectively, “Process” or “Processing” personal data and other Sensitive Information (as defined below), including
proprietary and confidential business data, trade secrets, and intellectual property that we collect in connection with clinical trials,
as necessary to operate our business, for legal and marketing purposes, and for other business-related purposes. Our data Processing activities
may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external
and internal privacy and security policies, representations, certifications, standards, publications, frameworks, contractual requirements
and other obligations related to data privacy and security collectively, “Data Protection Obligations”.
 
 
 


 26 
 

 
In the United States, federal,
state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data
privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping
laws). For example, the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act, or HITECH, imposes specific requirements relating to the privacy, security, and transmission
of individually identifiable health information.
 
In addition, over the past few
years, numerous U.S. states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy
laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording
residents with certain rights concerning their personal data. As applicable, such rights may include the right to access, correct, or
delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated
decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states
also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy
impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of
2018, or CCPA, applies to personal data of consumers, business representatives, and employees who are California residents, and requires
covered businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy
rights. The CCPA also provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data
breaches to recover significant statutory damages. The CCPA and other comprehensive U.S. state privacy laws exempt some data Processing
in the context of clinical trials, but these developments may further complicate compliance efforts, and increase legal risk and compliance
costs for us, the third parties with whom we work. Similar laws are being considered in several other states, as well as at the federal
and local levels, and we expect more states to pass similar laws in the future.
 
Outside the United States, an
increasing number of laws, regulations, and industry standards may govern data privacy and security. For example, the European Union’s
General Data Protection Regulation, or EU GDPR, and the United Kingdom’s GDPR, or UK GDPR, or collectively GDPR, Australia’s
Privacy Act, and India’s Information Technology Act and supplementary rules impose strict requirements for Processing personal data.
For example, under GDPR, companies can face private litigation related to Processing of personal data brought by classes of data subjects
or consumer protection organizations authorized at law to represent their interests, temporary or definitive restrictions on data Processing
or other corrective actions, and fines of up to the greater of 20 million Euros under the EU GDPR / 17.5 million pounds streamline under
the UK GDPR or 4% of their worldwide annual revenue, whichever is greater.
 
In addition, we may be unable
to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data localization requirements
or limitations on cross-border data flows. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting
the transfer of personal data to other countries. In particular, the European Economic Area, or EEA, and the United Kingdom, or UK, have
significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes
are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer
laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States
in compliance with law, such as the EEA’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum,
and the EU-U.S. Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who
self-certify compliance and participate in the Framework) these mechanisms are subject to legal challenges, and there is no assurance
that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. If there is no lawful manner for
us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant
transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations,
the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased
exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other
third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Some European
regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data out of Europe for allegedly
violating the EU GDPR’s cross-border data transfer limitations. Additionally, companies that transfer personal data to recipients
outside of the EEA and/or UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators
individual litigants and activist groups. 
 
 
 


 27 
 

 
We publish privacy policies and
may publish marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding
data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair,
or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.
 
In addition to data privacy and
security laws, we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations
in the future. We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with
such obligations may not be successful.
 
Data Protection Obligations, and
consumers’ data privacy expectations, are quickly changing, becoming increasingly stringent, and creating uncertainty. Additionally,
these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.
Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services,
information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
 
Although we endeavor to comply
with all applicable Data Protection Obligations, we may at times fail, or be perceived to have failed, to do so. Moreover, despite our
efforts, our personnel or third parties with whom we work may fail to comply with such obligations, which could negatively impact our
business operations and compliance posture.
 
If we or third parties fail, or
are perceived to have failed, to address or comply with applicable Data Protection Obligations, it could: increase our compliance and
operational costs; expose us to regulatory scrutiny, actions, fines and penalties; result in reputational harm; interrupt or stop our
clinical trials; result in litigation and liability; result in an inability to process personal data or to operate in certain jurisdictions;
harm our business operations or financial results or otherwise result in a material harm to our business, or other material adverse impact
on our business, results of operations and financial condition. Additionally, given that Data Protection Obligations impose complex and
burdensome obligations and that there is substantial uncertainty over the interpretation and application of these obligations, we may
be required to incur material costs, divert management attention, and change our business operations, including our clinical trials, in
an effort to comply, which could materially adversely affect our business operations and financial results.
 
Any of these events could have
a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions
or stoppages in our business operations including, as relevant, clinical trials inability to process personal data or to operate in certain
jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry;
adverse publicity; or revision or restructuring of our operations.
 
If our information technology systems, or those
of third parties with whom we work, or our data are or were compromised, we could experience adverse consequences resulting from such
compromise, including but not limited to: regulatory investigations or actions; litigation; fines and penalties; disruptions of our business
operations; reputational harm; loss of revenue or profits; and other adverse consequences.
 
In the ordinary course of our
business, we and third parties with whom we work may process proprietary, confidential and sensitive information, including personal data,
intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other third parties, or
collectively, Sensitive Information. We may use and share Sensitive Information with service providers and subprocessors and other third
parties with whom we work to help us operate our business. If we or such third parties with who we work have experienced, or in the future
experience, any security incident(s) that result in any data loss; deletion or destruction; unauthorized access to; loss, unauthorized
acquisition, disclosure, or exposure of, Sensitive Information, or other compromise related to the security, confidentiality, integrity
of our, or their, information technology, software, services, communications or data, or collection, a Security Breach, it may result
in an adverse impact on our business.
 
 
 


 28 
 

 
Cyberattacks, malicious internet-based
activity and online and offline fraud are prevalent, continue to rise, and are increasingly difficult to detect. These threats come from
a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal
threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors. Some actors
now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical
reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third
parties with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially
disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
 
We and the third parties with
whom we work are subject to a variety of evolving threats, including but not limited to social-engineering attacks, including through
deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks, supply-chain attacks, loss of data or
other information technology assets, adware, software bugs, malicious code, such as viruses and worms, employee theft or misuse, denial-of-service
attacks, such as credential stuffing, and ransomware attacks. We may also be the subject of viruses, malware, including as a result of
advanced persistent threat intrusions, server malfunction, software or hardware failures, loss of data or other computer assets, adware,
attacks enhanced or facilitated by AI, telecommunications failures, earthquakes, fires, floods, or other similar threats.
 
Ransomware attacks, including
by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe,
and can lead to significant interruptions in our operations, loss of Sensitive Information and income, reputational harm, and diversion
of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such
payments due to, for example, applicable laws or regulations prohibiting such payments.
 
Remote work has become more common
and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers,
and devices outside our premises or network, including working at home, while in transit and in public locations. Additionally, future
or past business transactions, such as acquisitions or integrations, could expose us to additional cybersecurity risks and vulnerabilities,
as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it
may be difficult to integrate companies into our information technology environment and security program.
 
In addition, our reliance on third-party
service providers could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our
business operations. We rely on third-parties and their technologies to operate critical business systems to process Sensitive Information
in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication
technology, employee email, content delivery to customers, and other functions. We also rely on third-party service providers to assist
with our clinical trials, provide other products or services, or otherwise to operate our business. Our ability to monitor these third
parties’ information security practices is limited, and these third parties may not have adequate information security measures
in place. If our third-party service providers experience a Security Breach or other interruption, we could experience adverse consequences.
While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations
to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks
have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our
third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could
result in a breach of or disruption to our information technology systems (including our services) or the third-party information technology
systems that support us and our services.
 
While we have implemented security
measures designed to protect against Security Breaches, these measures may not be effective. We take steps designed to detect, mitigate,
and remediate vulnerabilities in our information technology systems, including our products, hardware and/or software, including that
of third parties upon which we rely. We may not, however, detect or remediate all such vulnerabilities including on a timely basis. Further,
we may experience delays in developing and deploying remedial measures and patched designed to address any such identified vulnerabilities.
Vulnerabilities could be exploited and result in a security incident.
 
 
 


 29 
 

 
Any of the previously identified
or similar threats could cause a Security Breach or other interruption and disrupt our ability and that of third parties with whom we
work to provide our services.
 
We may expend significant resources,
fundamentally change our business activities and practices, or modify our operations, including clinical trial activities, or information
technology in an effort to protect against Security Breaches and to mitigate, detect and remediate actual and potential vulnerabilities.
Applicable Data Protection Obligations may require us to implement specific security measures or use industry-standard or reasonable measures
to protect against Security Breaches. Our security measures, or those of third parties with whom we work, may not be effective in protecting
against Security Breaches.
  
Applicable Data Protection Obligations
may require us to notify relevant stakeholders of Security Breaches, including affected individuals, customers, investors, partners, collaborators,
regulators, law enforcement agencies and others, or to implement other requirements, such as providing credit monitoring. Such disclosures
and compliance with such requirements are costly, and the disclosures or the failure to comply with such requirements could lead to an
adverse impact on our business, results of operations and financial condition. If we or a third party with whom we work experiences a
Security Breach or are perceived to have experienced a Security Breach, we may experience adverse consequences. These consequences may
include: government enforcement actions, for example, investigations, fines, penalties, audits, and inspections; additional reporting
requirements and/or oversight; restrictions on processing Sensitive Information, including personal data; litigation, including class
claims; indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention;
interruptions in our operations, including availability of data; financial loss; and other similar harms. Security Breaches or other interruptions
and attendant consequences may prevent or cause customers to stop using our services, deter new customers from using our services, and
negatively impact our ability to grow and operate our business.
 
Our contracts may not contain
limitations of liability, and even where they do, any such limitations or exclusions of liability in our contracts may not be adequate
to protect us from liabilities or damages if we fail to comply with Data Protection Obligations related to information security or Security
Breaches.
 
Our insurance coverage may not
be adequate or otherwise protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation,
fines, penalties, business loss, data loss, regulatory actions or other material adverse impact on our business, results of operations
and financial condition arising out of our Processing operations, privacy and security practices, or Security Breaches that we may experience.
In addition, such coverage may not continue to be available on commercially reasonable terms or at all or be sufficient coverage to pay
future claims. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results
in changes to our insurance policies, including premium increases or the imposition of large excess or deductible or co-insurance requirements,
could have a material adverse impact on our business, results of operations and financial condition.
 
In addition to experiencing a
Security Breach, third parties may gather, collect, or infer Sensitive Information about us from public sources, data brokers, or other
means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or
market position.
 
Should our products be approved for commercialization,
lack of third-party coverage and reimbursement for our devices could delay or limit their adoption.
 
In both the U.S. and international
markets, the use of medical devices is dependent in part on the availability of reimbursement from third-party payors, such as government
and private insurance plans. Healthcare providers that use medical devices generally rely on third-party payors to pay for all or part
of the costs and fees associated with the medical procedures being performed or to compensate them for their patient care services. Should
our products under development be approved for commercialization by the FDA, any such products may not be considered cost-effective, reimbursement
may not be available in the United States or other countries, if approved, and reimbursement may not be sufficient to allow sales of our
future products, including the Hemopurifier, on a profitable basis. The coverage decisions of third-party payors will be significantly
influenced by the assessment of our future products by health technology assessment bodies. These assessments are outside our control
and any such evaluations may not be conducted or have a favorable outcome.
  
 
 


 30 
 

 
If approved for use in the United
States, we expect that any products that we develop, including the Hemopurifier, will be purchased primarily by medical institutions,
which will in turn bill various third-party payors for the health care services provided to patients at their facility. Payors may include
the Centers for Medicare & Medicaid Services, or CMS, which administers the Medicare program and works in partnership with state governments
to administer Medicaid, other government programs and private insurance plans. The process involved in applying for coverage and incremental
reimbursement from CMS is lengthy and expensive. Further, Medicare coverage is based on our ability to demonstrate that the treatment
is “reasonable and necessary” for Medicare beneficiaries. Even if products utilizing our Aethlon Hemopurifier technology receive
FDA and other regulatory clearance or approval, they may not be granted coverage and reimbursement by any payor, including by CMS. For
some governmental programs, such as Medicaid, coverage and adequate reimbursement differ from state to state and some state Medicaid programs
may not pay adequate amounts for the procedure necessary to utilize products utilizing our technology system, or any payment at all. Moreover,
many private payors use coverage decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement
policies and amounts. However, no uniform policy requirement for coverage and reimbursement for medical devices exists among third-party
payors in the United States. Therefore, coverage and reimbursement can differ significantly from payor to payor. If CMS or other agencies
limit coverage or decrease or limit reimbursement payments for doctors and hospitals, this may affect coverage and reimbursement determinations
by many private payors for any products that we develop.
  
Should our Hemopurifier or any future products,
be approved for commercialization, certain health reform measures and adverse changes in reimbursement policies and procedures may impact
our ability to market and sell our products.
 
Healthcare costs have risen significantly
over the past decade, and there have been and continue to be proposals by legislators, regulators and third-party payors to decrease costs.
Third-party payors are increasingly challenging the prices charged for medical products and services and instituting cost containment
measures to control or significantly influence the purchase of medical products and services.
 
For example, in the United States,
the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively,
ACA, among other things, reduced and/or limited Medicare reimbursement to certain providers. On June 17, 2021, the U.S. Supreme Court
dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate”
was repealed by Congress. Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or IRA, into law, which
among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year
2025. The IRA also eliminates the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering
the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is unclear how any such challenges, and
the healthcare reform measures of the Biden administration will impact the ACA and our business. The Budget Control Act of 2011, as amended
by subsequent legislation, further reduces Medicare’s payments to providers by two percent through fiscal year 2032These reductions
may reduce providers’ revenues or profits, which could affect their ability to purchase new technologies. Furthermore, the healthcare
industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare
costs by imposing lower payment rates and negotiating reduced contract rates with service providers. In July 2021, the Biden Administration
released an executive order, “Promoting Competition in the American Economy,” which contained provisions relating to prescription
drugs. On September 9, 2021, in response to this executive order, the U.S. Department of Health and Human Services, or HHS, released a
Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential
legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles.
Further, the IRA, among other things (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics
covered under Medicare and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.
These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. HHS has
and will continue to issue and update guidance as these programs are implemented. It is currently unclear how the IRA will be implemented
but is likely to have a significant impact on the pharmaceutical industry. In addition, in response to the Biden administration’s
October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare
and Medicaid Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality
of care. It is unclear whether the models will be utilized in any health reform measures in the future.
 
 
 


 31 
 

 
Legislation could be adopted in
the future that limits payments for our products from governmental payors. In addition, commercial payors such as insurance companies,
could adopt similar policies that limit reimbursement for medical device manufacturers’ products. Therefore, it is possible that
our product or the procedures or patient care performed using our product will not be reimbursed at a cost-effective level. We face similar
risks relating to adverse changes in reimbursement procedures and policies in other countries where we may market our products. Reimbursement
and healthcare payment systems vary significantly among international markets. Our inability to obtain international reimbursement approval,
or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell our products and have
a material adverse effect on our business and financial condition.
 
Our ability to use net operating loss carryforwards
and certain other tax attributes to offset future taxable income or taxes may be limited.
 
Under current law, federal net
operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of
such federal net operating loss carryforwards in a taxable year is limited to 80% of taxable income in such year. In addition, under Sections
382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an
“ownership change,” which is generally defined as a greater than 50% change in its equity ownership value over a three-year
period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to
offset its post-change income or taxes may be limited. If we achieve profitability and an ownership change occurs and our ability to use
our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future
tax obligations. In addition, at the state level, there may be periods during which the use of net operating loss carryforwards is suspended
or otherwise limited, which could accelerate or permanently increase state taxes owed.
 
Uncertainties in the interpretation and application
of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate.
 
The tax regimes to which we are
subject or under which we operate are unsettled and may be subject to significant change. The issuance of additional guidance related
to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S. presidential
administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially
affect our tax obligations and effective tax rate. To the extent that such changes have a negative impact on us, including as a result
of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.
 
The amount of taxes we pay in
different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international
business activities, tax rates, new or revised tax laws, or interpretations of tax laws and policies, and our ability to operate our business
in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which
we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree
with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were
to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result
in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our financial
statements could fail to reflect adequate reserves to cover such a contingency. Similarly, a taxing authority could assert that we are
subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent
establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability
in one or more jurisdictions.
 
The Tax Cuts and Jobs Act of 2017
eliminated the option to deduct research and development expenses for tax purposes in the year incurred and requires taxpayers to capitalize
and subsequently amortize such expenses over five years for research activities conducted in the United States and over 15 years for research
activities conducted outside the United States. Although there have been legislative proposals to repeal or defer the capitalization requirement
to later years, there can be no assurance that the provision will be repealed or otherwise modified. Future guidance from the Internal
Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could
be repealed or modified in future legislation.
 
 
 


 32 
 

 
Our use of hazardous materials, chemicals and
viruses exposes us to potential liabilities for which we may not have adequate insurance.
 
Our research and development involves
the controlled use of hazardous materials, chemicals and viruses. The primary hazardous materials include chemicals needed to construct
the Hemopurifier cartridges and the infected plasma samples used in preclinical testing of the Hemopurifier. All other chemicals are fully
inventoried and reported to the appropriate authorities, such as the fire department, which inspects the facility on a regular basis.
We are subject to federal, state, local and foreign laws governing the use, manufacture, storage, handling and disposal of such materials.
Although we believe that our safety procedures for the use, manufacture, storage, handling and disposal of such materials comply with
the standards prescribed by federal, state, local and foreign regulations, we cannot completely eliminate the risk of accidental contamination
or injury from these materials. We have had no incidents or problems involving hazardous chemicals or biological samples. In the event
of such an accident, we could be held liable for significant damages or fines.
  
We currently carry a limited amount
of insurance to protect us from bodily injury or property damages arising from hazardous materials. Our product liability policy has a
$5,000,000 limit of liability. For our facilities, our property policy provides $25,000 in coverage for contaminant clean-up or removal
and $100,000 in coverage for damages to the premises resulting from contamination. Should we violate any regulations concerning the handling
or use of hazardous materials, or should any injuries or death result from our use or handling of hazardous materials, we could be the
subject of substantial lawsuits by governmental agencies or individuals. We may not have adequate insurance to cover all or any of such
claims, if any. If we were responsible to pay significant damages for violations or injuries, if any, we might be forced to cease operations
since such payments could deplete our available resources.
 
Our products may in the future be subject to
product recalls. A recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, including
a third-country authority, or the discovery of serious safety issues with our products, could have a significant adverse impact on us.
 
The FDA and similar foreign governmental
authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design
or manufacture. For the FDA, the authority to require a recall must be based on a finding that there is reasonable probability that the
device would cause serious injury or death. In addition, foreign governmental bodies have the authority to require the recall of our products
in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product
if any material deficiency in a device is found. The FDA requires that certain classifications of recalls be reported to the FDA within
ten working days after the recall is initiated. A government-mandated or voluntary recall by us or one of our international distributors
could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling
defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse
effect on our reputation, results of operations and financial condition, which could impair our ability to produce our products in a cost-effective
and timely manner in order to meet our customers’ demands. We may also be subject to liability claims, be required to bear other
costs, or take other actions that may have a negative impact on our future sales and our ability to generate profits. Companies are required
to maintain certain records of recalls, even if they are not reportable to the FDA or another third-country competent authority. We may
initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA or another third-country
competent authority. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future
recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement
action for failing to report recalls. We are also required to follow detailed recordkeeping requirements for all firm-initiated medical
device corrections and removals.
 
Even though we have received breakthrough device
designation for the Hemopurifier for two independent indications, this designation may not expedite the development or review of the Hemopurifier
and does not provide assurance ultimately of PMA submission or approval by the FDA.
 
The Breakthrough Devices Program
is a voluntary program intended to expedite the review, development, assessment and review of certain medical devices that provide for
more effective treatment or diagnosis of life-threatening or irreversibly debilitating human diseases or conditions for which no approved
or cleared treatment exists or that offer significant advantages over existing approved or cleared alternatives. All submissions for devices
designated as Breakthrough Devices will receive priority review, meaning that the review of the submission is placed at the top of the
appropriate review queue and receives additional review resources, as needed.
 
 
 


 33 
 

 
Although breakthrough designation
or access to any other expedited program may expedite the development or approval process, it does not change the standards for approval.
Although we obtained breakthrough device designation for the Hemopurifier for two indications, we may not experience faster development
timelines or achieve faster review or approval compared to conventional FDA procedures. For example, the time required to identify and
resolve issues relating to manufacturing and controls, the acquisition of a sufficient supply of our product for clinical trial purposes
or the need to conduct additional nonclinical or clinical studies may delay approval by the FDA, even if the product qualifies for breakthrough
designation or access to any other expedited program. Access to an expedited program may also be withdrawn by the FDA if it believes that
the designation is no longer supported by data from our clinical development program. Additionally, qualification for any expedited review
procedure does not ensure that we will ultimately obtain regulatory approval for the product.
 
Our bylaws designate the Eighth Judicial District
Court of Clark County, Nevada, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our
stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,
officers, employees or agents.
 
Our bylaws require that, to the
fullest extent permitted by law, and unless the Company consents in writing to the selection of an alternative forum, the Eighth Judicial
District Court of Clark County, Nevada, will, to the fullest extent permitted by law, be the sole and exclusive forum for each of the
following:
 


 
·
any derivative action or proceeding brought in the name or right of the Company or on its behalf,

 
 
 

 
·
any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company’s stockholders,

 
 
 

 
·
any action arising or asserting a claim arising pursuant to any provision of NRS Chapters 78 or 92A or any provision of our articles of incorporation or bylaws, or

 
 
 

 
·
any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of our articles of incorporation or bylaws.

  
However, our bylaws provide that
the exclusive forum provisions do not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other
claim for which the federal courts have exclusive jurisdiction. We note that there is uncertainty as to whether a court would enforce
the provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Although
we believe this provision benefits us by providing increased consistency in the application of Nevada law in the types of lawsuits to
which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
 
Risks Related to Our Intellectual Property and Related Litigation
 
We rely upon licenses and patent rights from third parties which
are subject to termination or expiration.
 
We rely in part upon third-party
licenses and ownership rights assigned from third parties for the development of specific uses for our Hemopurifier devices. For example,
we are researching, developing and testing cancer-related applications for our devices under patents assigned from the London Health Science
Center Research, Inc. Should any of our licenses be prematurely terminated for any reason, or if the patents and intellectual property
assigned to us or owned by such entities that we have licensed are challenged or defeated by third parties, our research efforts could
be materially and adversely affected. Our licenses and patents assigned to us may not continue in force for as long as we require for
our research, development and testing of cancer treatments. It is possible that, if our licenses terminate or the underlying patents and
intellectual property is challenged or defeated or the patents and intellectual property assigned to us is challenged or defeated, suitable
replacements may not be obtained or developed on terms acceptable to us, if at all. There is also the related risk that we may not be
able to make the required payments under any patent license or assignment agreement, in which case we may lose to ability to use one or
more of the licensed or assigned patents.
 
 
 


 34 
 

 
We could become subject to intellectual property
litigation that could be costly, result in the diversion of management’s time and efforts, require us to pay damages, prevent us
from selling our commercially available products and/or reduce the margins we may realize from our products.
 
The medical devices industry is
characterized by extensive litigation and administrative proceedings over patent and other intellectual property rights. Whether a product
infringes a patent involves complex legal and factual issues, and the determination is often uncertain. There may be existing patents
of which we are unaware that our products under development may inadvertently infringe. The likelihood that patent infringement claims
may be brought against us increases as the number of participants in the infectious market increases and as we achieve more visibility
in the marketplace and introduce products to market.
 
Any infringement claim against
us, even if without merit, may cause us to incur substantial costs, and would place a significant strain on our financial resources, divert
the attention of management from our core business, and harm our reputation. In some cases, litigation may be threatened or brought by
a patent holding company or other adverse patent owner who has no relevant product revenues and against whom our patents may provide little
or no deterrence. If we are found to infringe any patents, we could be required to pay substantial damages, including triple damages if
an infringement is found to be willful. We also could be required to pay royalties and could be prevented from selling our products unless
we obtain a license or are able to redesign our products to avoid infringement. We may not be able to obtain a license enabling us to
sell our products on reasonable terms, or at all. If we fail to obtain any required licenses or make any necessary changes to our technologies
or the products, we may be unable to commercialize one or more of our products or may have to withdraw products from the market, all of
which would have a material adverse effect on our business, financial condition and results of operations.
 
If the combination of patents, trade secrets
and contractual provisions upon which we rely to protect our intellectual property is inadequate, our ability to commercialize our products
successfully will be harmed.
 
Our success depends significantly
on our ability to protect our proprietary rights to the technologies incorporated in our products. We currently have five issued U.S.
patents and two pending U.S. patent applications. We also have 24 issued foreign patents and have applied for 15 additional foreign and
international patents. Our issued patents begin to expire in August 2024, with the last of these patents expiring in 2031, although terminal
disclaimers, patent term extension or patent term adjustment can shorten or lengthen the patent term. We rely on a combination of patent
protection, trade secret laws and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology.
However, these may not adequately protect our rights or permit us to gain or keep any competitive advantage.
 
The issuance of a patent is not
conclusive as to its scope, validity or enforceability. The scope, validity or enforceability of our issued patents can be challenged
in litigation or proceedings before the U.S. Patent and Trademark Office or foreign patent offices where our applications are pending.
The U.S. Patent and Trademark Office or foreign offices may deny or require significant narrowing of claims in our pending patent applications.
Patents issued as a result of the pending patent applications, if any, may not provide us with significant commercial protection or be
issued in a form that is advantageous to us. Proceedings before the U.S. Patent and Trademark Office or foreign offices could result in
adverse decisions as to the priority of our inventions and the narrowing or invalidation of claims in issued patents. The laws of some
foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S., if at all. Some of our
patents may expire before we receive FDA approval to market our products in the United States or we receive approval to market our products
in a foreign country. Although we believe that certain patent applications and/or other patents issued more recently will help protect
the proprietary nature of the Hemopurifier treatment technology, this protection may not be sufficient to protect us during the development
of that technology.
  
Our competitors may successfully
challenge and invalidate or render unenforceable our issued patents, including any patents that may issue in the future, which could prevent
or limit our ability to market our products and could limit our ability to stop competitors from marketing products that are substantially
equivalent to ours. In addition, competitors may be able to design around our patents or develop products that provide outcomes that are
comparable to our products but that are not covered by our patents.
 
We have also entered into confidentiality
and assignment of intellectual property agreements with all of our employees, consultants and advisors directly involved in the development
of our technology as one of the ways we seek to protect our intellectual property and other proprietary technology. However, these agreements
may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of
unauthorized use or disclosure or other breaches of the agreements.
 
 
 


 35 
 

 
In the event a competitor infringes
upon any of our patents or other intellectual property rights, enforcing our rights may be difficult, time consuming and expensive, and
would divert management’s attention from managing our business. We may not be successful on the merits in any enforcement effort.
In addition, we may not have sufficient resources to litigate, enforce or defend our intellectual property rights.
 
We may rely on licenses for new technology,
which may affect our continued operations with respect thereto.
 
As we develop our technology,
we may need to license additional technologies to optimize the performance of our products. We may not be able to license these technologies
on commercially reasonable terms or at all. In addition, we may fail to successfully integrate any licensed technology into our proposed
products. Our inability to obtain any necessary licenses could delay our product development and testing until alternative technologies
can be identified, licensed and integrated. The inability to obtain any necessary third-party licenses could cause us to abandon a particular
development path, which could seriously harm our business, financial position and results of our operations.
 
New technology may lead to our competitors developing
superior products which would reduce demand for our products.
 
Research into technologies similar
to ours is proceeding at a rapid pace, and many private and public companies and research institutions are actively engaged in the development
of products similar to ours. These new technologies may, if successfully developed, offer significant performance or price advantages
when compared with our technologies. Our existing patents or our pending and proposed patent applications may not offer meaningful protection
if a competitor develops a novel product based on a new technology.
 
If we are unable to protect our proprietary
technology and preserve our trade secrets, we will increase our vulnerability to competitors which could materially adversely impact our
ability to remain in business.
 
Our ability to successfully commercialize
our products will depend on our ability to protect those products and our technology with domestic and foreign patents. We will also need
to continue to preserve our trade secrets. The issuance of a patent is not conclusive as to its validity or as to the enforceable scope
of the claims of the patent. The patent positions of technology companies, including us, are uncertain and involve complex legal and factual
issues. Our patents may not prevent other companies from developing similar products or products which produce benefits substantially
the same as our products, and other companies may be issued patents that may prevent the sale of our products or require us to pay significant
licensing fees in order to market our products.
  
From time to time, we may need
to obtain licenses to patents and other proprietary rights held by third parties in order to develop, manufacture and market our products.
If we are unable to timely obtain these licenses on commercially reasonable terms, our ability to commercially exploit such products may
be inhibited or prevented. Our pending patent applications may not result in issued patents, patent protection may not be secured for
any particular technology, and our issued patents may not be valid or enforceable or provide us with meaningful protection.
 
If we are required to engage in expensive and
lengthy litigation to enforce our intellectual property rights, such litigation could be very costly and the results of such litigation
may not be satisfactory.
 
Although we have entered into
invention assignment agreements with our employees and with certain advisors, and we routinely enter into confidentiality agreements with
our contract partners, if those employees, advisors or contract partners develop inventions or processes independently that may relate
to products or technology under development by us, disputes may arise about the ownership of those inventions or processes. Time-consuming
and costly litigation could be necessary to enforce and determine the scope of our rights under these agreements. In addition, we may
be required to commence litigation to enforce such agreements if they are violated, and it is certainly possible that we will not have
adequate remedies for breaches of our confidentiality agreements as monetary damages may not be sufficient to compensate us. We may be
unable to fund the costs of any such litigation to a satisfactory conclusion, which could leave us without recourse to enforce contracts
that protect our intellectual property rights.
 
 
 


 36 
 

 
Other companies may claim that our technology
infringes on their intellectual property or proprietary rights and commence legal proceedings against us which could be time-consuming
and expensive and could result in our being prohibited from developing, marketing, selling or distributing our products.
 
Because of the complex and difficult
legal and factual questions that relate to patent positions in our industry, it is possible that our products or technology could be found
to infringe upon the intellectual property or proprietary rights of others. Third parties may claim that our products or technology infringe
on their patents, copyrights, trademarks or other proprietary rights and demand that we cease development or marketing of those products
or technology or pay license fees. We may not be able to avoid costly patent infringement litigation, which will divert the attention
of management away from the development of new products and the operation of our business. We may not prevail in any such litigation.
If we are found to have infringed on a third-party’s intellectual property rights, we may be liable for money damages, encounter
significant delays in bringing products to market or be precluded from manufacturing particular products or using particular technology.
 
Other parties may challenge certain
of our foreign patent applications. If any such parties are successful in opposing our foreign patent applications, we may not gain the
protection afforded by those patent applications in particular jurisdictions and may face additional proceedings with respect to similar
patents in other jurisdictions, as well as related patents. The loss of patent protection in one jurisdiction may influence our ability
to maintain patent protection for the same technology in other jurisdictions.
 
Risks Related to U.S. Government Contracts
 
We may not obtain additional U.S. Government
contracts to further develop our technology.
 
While we have previously had U.S.
government contracts, we may not be successful in obtaining additional government grants or contracts. The process of obtaining government
contracts is lengthy with the uncertainty that we will be successful in obtaining announced grants or contracts for therapeutics as a
medical device technology. Accordingly, although we have obtained government contracts in the past, we may not be awarded any additional
U.S. Government grants or contracts utilizing our Hemopurifier platform technology.
 
U.S. Government agencies have special contracting
requirements, including a right to audit us, which create additional risks; a negative audit would be detrimental to
us.
 
Our business plan to utilize the
Aethlon Hemopurifier technology may seek to involve contracts with the U.S. Government. Many government contracts, typically contain unfavorable
termination provisions and are subject to audit and modification by the government at its sole discretion, which would subject us to additional
risks should we obtain contracts with the U.S. Government in the future. These risks include the ability of the U.S. Government to unilaterally:
  


 
·
suspend or prevent us for a period of time from receiving new contracts or extending existing contracts based on violations or suspected violations of laws or regulations;

 


 
·
audit and object to our contract-related costs and fees, including allocated indirect costs;

 


 
·
control and potentially prohibit the export of our products; and

 


 
·
change certain terms and conditions in our contracts.

   
 
 


 37 
 

 
As a former and potential future
U.S. Government contractor, we are required to comply with applicable laws, regulations and standards relating to our accounting practices
and would be subject to periodic audits and reviews. As part of any such audit or review, the U.S. Government may review the adequacy
of, and our compliance with, our internal control systems and policies, including those relating to our purchasing, property, estimating,
compensation and management information systems. Based on the results of its audits, the U.S. Government may adjust our contract-related
costs and fees, including allocated indirect costs. In addition, if an audit or review uncovers any improper or illegal activity, we would
possibly be subject to civil and criminal penalties and administrative sanctions, including termination of our contracts, forfeiture of
profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. We could also suffer
serious harm to our reputation if allegations of impropriety were made against us. Although we have not had any government audits and
reviews to date, future audits and reviews could cause adverse effects. In addition, under U.S. Government purchasing regulations, some
of our costs, including most financing costs, amortization of intangible assets, portions of our research and development costs, and some
marketing expenses, would possibly not be reimbursable or allowed under such contracts. Further, as a former and potential future U.S.
Government contractor, we would be subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits
and other legal actions and liabilities.
 
As a potential future U.S. Government contractor, we would be subject
to a number of procurement rules and regulations.
 
Government contractors must comply
with specific procurement regulations and other requirements. These requirements, although customary in government contracts, would impact
our performance and compliance costs. In addition, current U.S. Government budgetary constraints could lead to changes in the procurement
environment, including the Department of Defense’s initiative focused on efficiencies, affordability and cost growth and other changes
to its procurement practices. If and to the extent such changes occur, they could affect whether and, if so, how we pursue certain opportunities
and the terms under which we are able to do so.
 
In addition, failure to comply
with these regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, and
the assessment of penalties and fines, which could negatively impact our results of operations and financial condition. Our failure to
comply with these regulations and requirements could also lead to suspension or debarment, for cause, from government contracting or subcontracting
for a period of time. Among the causes for debarment are violations of various statutes, including those related to procurement integrity,
export control, government security regulations, employment practices, protection of the environment, accuracy of records and the recording
of costs, and foreign corruption. The termination of any government contract we may obtain as a result of any of these acts could have
a negative impact on our results of operations and financial condition and could have a negative impact on our reputation and ability
to procure other government contracts in the future.
 
Risks Relating to Our Common Stock and Our Corporate Governance
 
If we are unable to regain compliance with the
listing requirements of the Nasdaq Capital Market, our common stock may be delisted from the Nasdaq Capital Market, which could have a
material adverse effect on our financial condition and could make it more difficult for you to sell your shares.
 
Our common stock is listed on
the Nasdaq Capital Market and we are therefore subject to its continued listing requirements, including requirements with respect to the
market value of publicly held shares, market value of listed shares, minimum bid price per share (subject to a 180-day grace period, as
discussed below) and minimum stockholders' equity, among others, and requirements relating to board and committee independence. If we
fail to satisfy one or more of the requirements, we may be delisted from the Nasdaq Capital Market.
 
On June 27, 2024, we received
a letter, or Notice, from The Nasdaq Stock Market, or Nasdaq, that we were not in compliance with the $1.00 minimum bid price requirement
for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2), or the Minimum Bid Price Requirement.
The Notice indicated that, consistent with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days to regain compliance with the
Minimum Bid Price Requirement by having the closing bid price of our common stock meet or exceed $1.00 per share for at least ten consecutive
business days.
 
 
 


 38 
 

 
 
There can be no assurance,
however, that we will be able to regain compliance with the Minimum Bid Price Requirement. Even if we do regain compliance, we may not
be able to maintain compliance with the continued listing requirements for the Nasdaq Capital Market or our common stock could be delisted
in the future. In addition, we may be unable to meet other applicable listing requirements of the Nasdaq Capital Market, including maintaining
minimum levels of stockholders’ equity or market values of our common stock in which case, our common stock could be delisted notwithstanding
our ability to demonstrate compliance with the Minimum Bid Price Requirement.
 
Delisting from the Nasdaq Capital
Market may adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly
affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. Delisting
also could have other negative results, including the potential loss of employee confidence, the loss of institutional investors or interest
in business development opportunities.
 
Historically we have not paid dividends on our
common stock, and we do not anticipate paying any cash dividends in the foreseeable future.
 
We have never paid cash dividends
on our common stock. We intend to retain our future earnings, if any, to fund operational and capital expenditure needs of our business,
and do not anticipate paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, of our common stock
will be the sole source of gain for our common stockholders in the foreseeable future.
 
Our stock price is speculative, and there is
a risk of litigation.
 
The trading price of our common
stock has in the past and may in the future be subject to wide fluctuations in response to factors such as the following:
 


 
·
failure to raise additional funds when needed;

 
 
 

 
·
announcements regarding our ongoing development of the Hemopurifier;

 
 
 

 
·
results regarding the progress of our clinical trials with the Hemopurifier; 

 
 
 

 
·
results reported from our clinical trials with the Hemopurifier;

 
 
 

 
·
failure to meet the continued listing requirements of and maintain our listing on Nasdaq;

 


 
·
results of operations or revenue in any quarter failing to meet the expectations, published or otherwise, of the investment community;

 


 
·
reduced investor confidence in equity markets;

 


 
·
speculation in the press or analyst community;

 


 
·
wide fluctuations in stock prices, particularly with respect to the stock prices for other medical device companies;

 


 
·
announcements of technological innovations by us or our competitors;

 


 
·
new products or the acquisition of significant customers by us or our competitors;

 
 
 


 39 
 

 


 
·
changes in interest rates;

 


 
·
changes in investors’ beliefs as to the appropriate price-earnings ratios for us and our competitors;

 


 
·
changes in recommendations or financial estimates by securities analysts who track our common stock or the stock of other medical device companies;

 


 
·
changes in management;

 


 
·
sales of common stock by directors and executive officers;

 


 
·
rumors or dissemination of false or misleading information, particularly through Internet chat rooms, instant messaging, and other rapid-dissemination methods;

 


 
·
conditions and trends in the medical device industry generally;

 


 
·
the announcement of acquisitions or other significant transactions by us or our competitors;

 


 
·
adoption of new accounting standards affecting our industry;

 
 
 

 
·
changes in the structure of healthcare payment systems;

 


 
·
general market conditions;

 


 
·
domestic or international terrorism and other factors; and

 


 
·
the other factors described in this section.

 
Fluctuations in the price of our
common stock may expose us to the risk of securities class action lawsuits. Although no such lawsuits are currently pending against us
and we are not aware that any such lawsuit is threatened to be filed in the future, future lawsuits are possible as a result of fluctuations
in the price of our common stock. Defending against any such suits could result in substantial cost and divert management’s attention
and resources. In addition, any settlement or adverse determination of such lawsuits could subject us to significant liability.
 
If at any time our common stock is subject to
the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in
our securities may be adversely affected.
 
If at any time our common stock
is not listed on a national securities exchange or we have net tangible assets of $2,000,000 or less, or we have an average revenue of
less than $6,000,000 for the last three years, and our common stock has a market price per share of less than $5.00, transactions in our
common stock will be subject to the SEC’s “penny stock” rules. Currently, our common stock is subject to the SEC’s
“penny stock” rules promulgated under the Exchange Act and as a result, broker-dealers may find it difficult to effectuate
customer transactions and trading activity in our securities may be adversely affected. For any transaction involving a penny stock, unless
exempt, the rules require:
 
 
 


 40 
 

 


 
·
that a broker or dealer approve a person’s account for transactions in penny stocks; 

 


 
·
furnish the investor a disclosure document describing the risks of investing in penny stocks; 

 


 
·
disclose to the investor the current market quotation, if any, for the penny stock; 

 


 
·
disclose to the investor the amount of compensation the firm and its broker will receive for the trade; and

 


 
·
The broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 
In order to approve a person’s
account for transactions in penny stocks, the broker or dealer must:
 


 
·
obtain financial information and investment experience objectives of the person; and

 


 
·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 
The broker or dealer must also
deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which,
in highlight form:
 


 
·
sets forth the basis on which the broker or dealer made the suitability determination; and

 


 
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

  
Generally, brokers may be less
willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of our stock.
 
Disclosure also has to be made
about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both
the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in penny stocks.
 
Our common stock has had an unpredictable trading
volume which means you may not be able to sell our shares at or near trading prices or at all.
 
Trading in our common shares historically
has been volatile and often has been thin, meaning that the number of persons interested in purchasing our common shares at or near trading
prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the
fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the
investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to
be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until
such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity
in our shares is minimal, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally
support continuous sales without an adverse effect on share price. A broader or more active public trading market for our common shares
may not develop or be sustained, and current trading levels may decrease.
 
 
 


 41 
 

 
The market price for our common stock is volatile;
you may not be able to sell our common stock at or above the price you have paid for it, which may result in losses to you.
 
The market for our common stock
is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to
be more volatile than a seasoned issuer for the indefinite future. During the 52-week period ended March 31, 2024, the high and low closing
sale prices for a share of our common stock were $6.10 and $1.42, respectively. The volatility in our share price is attributable to a
number of factors. First, as noted above, trading in our common stock often has been thin. As a consequence of this lack of liquidity,
the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in
either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares
are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse
impact on its share price. Secondly, we are a speculative investment due to our limited operating history, limited amount of cash and
revenue, lack of profit to date, and the uncertainty of future market acceptance for our potential products. As a consequence of this
enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news
or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case
with the stock of a seasoned issuer.
 
The following factors also may
add to the volatility in the price of our common stock: actual or anticipated variations in our quarterly or annual operating results;
announcements regarding our clinical trials and the development and manufacture of our Hemopurifier; acceptance of our proprietary technology
as a viable method of augmenting the immune response of clearing viruses and toxins from human blood; government regulations, announcements
of significant acquisitions, strategic partnerships or joint ventures; our capital commitments and additions or departures of our key
personnel. Many of these factors are beyond our control and may decrease the market price of our common shares regardless of our operating
performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any
time, including as to whether our common shares will sustain their current market prices, or as to what effect the sale of shares or the
availability of common shares for sale at any time will have on the prevailing market price.
 
Our issuance of additional shares of common
stock or convertible securities could be dilutive.
 
We are entitled under our articles
of incorporation to issue up to 60,000,000 shares of common stock. As of March 31, 2024, we have reserved for issuance 124,028 of those
shares of common stock for outstanding restricted stock units, stock options and warrants, excluding an aggregate of 131,576 issuances
of restricted stock units to our independent directors under our 2020 Equity Incentive Plan made subsequent to March 31, 2024. As of March
31, 2024, we had issued and outstanding 2,629,725 shares of common stock. As a result, as of March 31, 2024 we had 57,246,247 shares of
common stock available for issuance to new investors or for use to satisfy indebtedness or pay service providers.
 
On May 17, 2024, we closed a public
offering pursuant to which we sold an aggregate of: (i) 2,450,000 shares of our common stock and accompanying Class A warrants to purchase
up to 2,450,000 shares of common stock and Class B warrants to purchase up to 2,450,000 shares of common stock, at a combined public offering
price of $0.58 per share and accompanying warrants; and (ii) in lieu of common stock, pre-funded warrants to purchase 5,650,000 shares
of common stock and accompanying Class A warrants to purchase up to 5,650,000 shares of common stock and Class B warrants to purchase
up to 5,650,000 shares of common stock, at a combined public offering price of $0.579 per pre-funded warrant and accompanying warrants,
which is equal to the public offering price per share of common stock, and accompanying warrants less the $0.001 per share exercise price
of each such pre-funded warrant.
 
On March 24, 2022, we entered
into an At the Market Offering Agreement, or the 2022 ATM Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, which established
an at-the-market equity program pursuant to which we may offer and sell shares of our common stock from time to time as set forth in the
2022 ATM Agreement. During the fiscal year ended March 31, 2024, we sold an aggregate of 296,056 shares under the 2022 ATM Agreement for
net proceeds of $1,322,383. As of March 31, 2024, $5,302,617 of shares of common stock remained available for sale under the 2022 ATM
Agreement.
 
 
 


 42 
 

 
Our Board of Directors may generally
issue shares of common stock, restricted stock units or stock options or warrants to purchase those shares, without further approval by
our stockholders, based upon such factors as our Board of Directors may deem relevant at that time. It is likely that we will be required
to issue a large amount of additional securities to raise capital to further our development. It is also likely that we will be required
to issue a large amount of additional securities to directors, officers, employees and consultants as compensatory grants in connection
with their services, both in the form of stand-alone grants or under our stock plans.
 
Our officers and directors are entitled to indemnification from us
for liabilities under our articles of incorporation, which could be costly to us and may discourage the exercise of stockholder rights.
 
Our articles of incorporation
provide that we possess and may exercise all powers of indemnification of our officers, directors, employees, agents and other persons
and our bylaws also require us to indemnify our officers and directors as permitted under the provisions of the Nevada Revised Statutes,
or NRS. We may also have contractual indemnification obligations under our agreements with our directors, officers and employees. The
foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or
damage awards against directors and officers. These provisions and resultant costs may also discourage our company from bringing a lawsuit
against directors, officers and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative
litigation by our stockholders against our directors, officers and employees even though such actions, if successful, might otherwise
benefit our company and stockholders.
 
Our bylaws and Nevada law may discourage, delay
or prevent a change of control of our company or changes in our management, would have the result of depressing the trading price of our
common stock.
 
Certain anti-takeover provisions
of Nevada law could have the effect of delaying or preventing a third-party from acquiring us, even if the acquisition arguably could
benefit our stockholders.
 
Nevada’s “combinations
with interested stockholders” statutes (NRS 78.411 through 78.444, inclusive) prohibit specified types of business “combinations”
between certain Nevada corporations and any person deemed to be an “interested stockholder” for two years after such person
first becomes an “interested stockholder” unless the corporation’s board of directors approves the combination (or the
transaction by which such person becomes an “interested stockholder”) in advance, or unless the combination is approved by
the board of directors and sixty percent of the corporation’s voting power not beneficially owned by the interested stockholder,
its affiliates and associates. Further, in the absence of prior approval certain restrictions may apply even after such two year period.
However, these statutes do not apply to any combination of a corporation and an interested stockholder after the expiration of four years
after the person first became an interested stockholder. For purposes of these statutes, an “interested stockholder” is any
person who is (1) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares
of the corporation, or (2) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial
owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition
of the term “combination” is sufficiently broad to cover most significant transactions between a corporation and an “interested
stockholder.” A Nevada corporation may elect in its articles of incorporation not to be governed by these particular laws, but if
such election is not made in the corporation’s original articles of incorporation, the amendment (1) must be approved by the affirmative
vote of the holders of stock representing a majority of the outstanding voting power of the corporation not beneficially owned by interested
stockholders or their affiliates and associates, and (2) is not effective until 18 months after the vote approving the amendment and does
not apply to any combination with a person who first became an interested stockholder on or before the effective date of the amendment.
We did not make such an election in our original articles of incorporation and have not amended our articles of incorporation to so elect.
 
 
 


 43 
 

 
Nevada’s “acquisition
of controlling interest” statutes (NRS 78.378 through 78.3793, inclusive) contain provisions governing the acquisition of a controlling
interest in certain Nevada corporations. These “control share” laws provide generally that any person that acquires a “controlling
interest” in certain Nevada corporations may be denied voting rights, unless a majority of the disinterested stockholders of the
corporation elects to restore such voting rights. These laws would apply to us if we were to have 200 or more stockholders of record (at
least 100 of whom have addresses in Nevada appearing on our stock ledger) and do business in the State of Nevada directly or through an
affiliated corporation, unless our articles of incorporation or bylaws in effect on the tenth day after the acquisition of a controlling
interest provide otherwise. These laws provide that a person acquires a “controlling interest” whenever a person acquires
shares of a subject corporation that, but for the application of these provisions of the NRS, would enable that person to exercise (1)
one fifth or more, but less than one third, (2) one third or more, but less than a majority or (3) a majority or more, of all of the voting
power of the corporation in the election of directors. Once an acquirer crosses one of these thresholds, shares which it acquired in the
transaction taking it over the threshold and within the 90 days immediately preceding the date when the acquiring person acquired or offered
to acquire a controlling interest become “control shares” to which the voting restrictions described above apply. These laws
may have a chilling effect on certain transactions if our articles of incorporation or bylaws are not amended to provide that these provisions
do not apply to us or to an acquisition of a controlling interest, or if our disinterested stockholders do not confer voting rights in
the control shares.
 
Various provisions of our bylaws
may delay, defer or prevent a tender offer or takeover attempt of us that a stockholder might consider in his or her best interest. Our
bylaws may be adopted, amended or repealed by the affirmative vote of the holders of at least a majority of our outstanding shares of
capital stock entitled to vote for the election of directors, and except as provided by Nevada law, our Board of Directors shall have
the power to adopt, amend or repeal the bylaws by a vote of not less than a majority of our directors. The interests of these stockholders
and directors may not be consistent with your interests, and they may make changes to the bylaws that are not in line with your concerns.
 
Nevada law also provides that
directors may resist a change or potential change in control if the directors determine that the change is opposed to, or not in the best
interests of, the corporation. The existence of the foregoing provisions and other potential anti-takeover measures could limit the price
that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our
company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
 
We incur substantial costs as a result of being
a public company and our management expects to devote substantial time to public company compliance programs.
 
As a public company, we incur
significant legal, insurance, accounting and other expenses, including costs associated with public company reporting. We intend to invest
resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative
expenses and may divert management’s time and attention from product development and commercialization activities. If our efforts
to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities
related to practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. These laws and
regulations could make it more difficult and costly for us to obtain director and officer liability insurance for our directors and officers,
and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make
it more difficult for us to attract and retain qualified executive officers and qualified members of our Board of Directors, particularly
to serve on our audit and compensation committees. In addition, if we are unable to continue to meet the legal, regulatory and other requirements
related to being a public company, we may not be able to maintain the quotation of our common stock on the Nasdaq Capital Market or on
any other senior market to which we may apply for listing, which would likely have a material adverse effect on the trading price of our
common stock.
 
If securities or industry analysts do not publish
research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading
volume could decline.
 
The trading market for our common
stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. Our research
coverage by industry and financial analysts is currently limited. Even if our analyst coverage increases, if one or more of the analysts
who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company
or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price
or trading volume to decline.
 
 
 


 44 
 

 
ITEM 1B. UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM 1C. CYBERSECURITY
 
Risk management and strategy
 
We have implemented and maintain various information
security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks,
third party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, confidential
information that is proprietary, strategic or competitive in nature, information related to our clinical trials, and information of our
employees, or Information Systems and Data.
 
The Company’s Chief Financial Officer,
or CFO, with assistance from our third-party cybersecurity vendors, is responsible for identifying, assessing, and managing our cybersecurity
threats and risks. Together, they identify and assess risks from cybersecurity threats by monitoring and evaluating our threat environment
using various methods including, for example, automated tools, evaluating our and our industry’s risk profile, conducting real-time
monitoring of certain systems, and implementing escalation protocols with our third-party cybersecurity vendors.
 
Depending on the environment, we implement and
maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material
risks from cybersecurity threats to our Information Systems and Data, including, for example: an incident response plan; incident detection
and response tools; encryption of certain sensitive data and certain data on mobile systems; certain access controls enforcing the principle
of need-to-know encryption of certain sensitive data and certain data on mobile systems; physical security measures; asset management,
tracking and disposal; monitoring of certain systems; and employee training.
 
Our assessment and management of material risks
from cybersecurity threats are integrated into our overall risk management processes. For example, cybersecurity risk is addressed through
our quality management system and processes and overseen by our audit committee of the board of directors. We use third-party service
providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including, for example,
professional services firms, including legal counsel and certain cybersecurity service providers.
 
We use third-party service providers to perform
a variety of functions throughout our business, such as hosting companies and contract research organizations. We have a vendor management
program to manage cybersecurity risks associated with our use of these providers. The program includes conducting a risk assessment for
certain vendors.
 
For a description of the risks from cybersecurity
threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A. Risk Factors in this
Annual Report on Form 10-K, including “If our information technology systems, or those of third parties with whom we work, or
our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to:
regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss
of revenue or profits; and other adverse consequences.”
 
Governance
 
Our board of directors addresses the Company’s
cybersecurity risk management as part of its general oversight function. The board of directors’ audit committee is responsible
for overseeing Company’s cybersecurity risk management processes, including oversight of mitigation of risks from cybersecurity
threats.
 
 
 


 45 
 

 
Our cybersecurity risk assessment and management
processes are implemented and maintained by certain Company management, including the Interim Chief Executive Officer, or CEO, and CFO.
 
The CFO is responsible for hiring appropriate
personnel (including selecting third-party cybersecurity vendors), helping to integrate cybersecurity risk considerations into the Company’s
overall risk management strategy, and communicating key priorities to relevant personnel. The CFO is responsible for approving budgets,
helping prepare for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related
reports.
 
Our cybersecurity incident response plan is designed
to escalate certain cybersecurity incidents to members of management depending on the circumstances, including CFO and CEO. The CFO and
CEO work with our incident response team to help us mitigate and remediate cybersecurity incidents of which they are notified. In addition,
our incident response plan includes reporting to the audit committee of the board of directors for certain cybersecurity incidents.
 
The audit committee receives periodic reports
from the CFO concerning our significant cybersecurity threats and risk and the processes we have implemented to address them. The audit
committee also has access to various reports, summaries or presentations related to cybersecurity threats, risk and mitigation.
 
ITEM 2. PROPERTIES
 
Office, Lab and Manufacturing Space Leases
 
In December 2020, we entered into
an agreement to lease approximately 2,823 square feet of office space and 1,807 square feet of laboratory space located at 11555 Sorrento
Valley Road, Suite 203, San Diego, California 92121 and 11575 Sorrento Valley Road, Suite 200, San Diego, California 92121, respectively.
The agreement carries a term of 63 months and we took possession of the office space effective October 1, 2021. We took possession of
the laboratory space effective January 1, 2022. In October 2021, we entered into another lease for approximately 2,655 square feet of
space to house our manufacturing operations located at 11588 Sorrento Valley Road, San Diego, California 92121. The term is for 55 months
and we took possession of the manufacturing space in August 2022. The current monthly base rent under the office and laboratory component
of the lease is $14,158. The current monthly base rent under the manufacturing component of the lease is $12,452
  
The office, lab and manufacturing
leases are coterminous with a remaining term of 36 months. The weighted average discount rate is 4.25%.
 
As of our March 31, 2024 balance
sheet, we have a right-of-use lease asset of $883,054.
 
The following table presents a
maturity analysis of expected undiscounted cash flows for operating leases on an annual basis for the next three fiscal years. All of
our leases conterminously expire during the fiscal year ending March 31, 2027.


  
  

Fiscal Year Ended March 31, 
  

2025 
 323,812 

2026 
 333,462 

2027 
 343,352 

Total minimum lease payments 
 1,000,626 

Less amount representing imputed interest 
 (60,310)

Present value of minimum lease payments 
$940,316 

 
 
 


 46 
 

 
ITEM 3. LEGAL PROCEEDINGS
 
We may be involved from time to
time in various claims, lawsuits, and/or disputes with third parties or breach of contract actions incidental to the normal course of
our business operations. We are currently not involved in any litigation or any pending legal proceedings.
 
ITEM 4. MINE SAFETY DISCLOSURES
 
Not applicable.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 47 
 

 

PART II
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information
 
Our common stock is traded on
the Nasdaq Capital Market under the trading symbol “AEMD.” On July 7, 2015, The Nasdaq Stock Market LLC approved our application
for listing our common stock on the Nasdaq Capital Market under the symbol “AEMD,” and we commenced trading on the Nasdaq
Capital Market on July 13, 2015. Previously, our common stock was quoted on the OTCQB Marketplace under the trading symbol “AEMD.”
 
Holders of Record
 
There were approximately 62 record
holders of our common stock at June 25, 2024. The number of registered stockholders includes any beneficial owners of common shares held
in street name.
 
Dividend Policy
 
We have not paid any dividends
on our common stock to date and do not anticipate that we will pay dividends in the foreseeable future. Any payment of cash dividends
on our common stock in the future will be dependent upon the amount of funds legally available, our earnings, if any, our financial condition,
our anticipated capital requirements and other factors that the Board of Directors may think are relevant. However, we currently intend
for the foreseeable future to follow a policy of retaining all of our earnings, if any, to finance the development and expansion of our
business and, therefore, do not expect to pay any dividends on our common stock in the foreseeable future.
  
Recent Sales of Unregistered Securities
 
The Company did not have any sales
of unregistered securities for the period covered by this Annual Report.
   
Securities Authorized for Issuance Under Equity
Compensation Plans
 
Information about our equity compensation
plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.
 
ITEM 6. [RESERVED]
 
 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Overview
 
The following discussion and analysis
should be read in conjunction with the consolidated Financial Statements and Notes thereto appearing elsewhere in this Annual Report.
 
 
 


 48 
 

 
We are
a medical therapeutic company focused on developing the Hemopurifier, a clinical-stage immunotherapeutic device designed to combat cancer
and life-threatening viral infections and for use in organ transplantation. In human studies, 164 sessions with 38 patients, the Hemopurifier
was safely utilized and demonstrated the potential to remove life-threatening viruses. In pre-clinical studies, the Hemopurifier has demonstrated
the potential to remove harmful exosomes and exosomal particles from biological fluids, utilizing its proprietary lectin-based technology.
This action has potential applications in cancer, where exosomes and exosomal particles may promote immune suppression and metastasis,
and in life-threatening infectious diseases. The FDA has designated the Hemopurifier as a “Breakthrough Device” for two independent
indications:
 


 
·

the treatment of individuals with advanced or
metastatic cancer who are either unresponsive to or intolerant of standard of care therapy, and with cancer types in which exosomes or
exosomal particles have been shown to participate in the development or severity of the disease; and

 
 
 

 
·
the treatment of life-threatening viruses that are not addressed with approved therapies.

 
Oncology
 
We believe the Hemopurifier may be a substantial advancement
in the treatment of patients with advanced and metastatic cancer through its design to bind to and remove harmful exosomes and exosomal
particles that promote the growth and spread of tumors. In October 2022, we formed a wholly-owned subsidiary in Australia to initially
conduct oncology-related clinical research, then seek regulatory approval and commercialize our Hemopurifier in Australia. We are currently
working with our contract research organization, or CRO, on preparations to conduct a clinical trial in Australia in patients with solid
tumors, including head and neck cancer, and gastrointestinal cancers.
 
In January 2023, we entered into an agreement with
North American Science Associates, LLC, or NAMSA, a world leading medical technology CRO offering global end-to-end development services,
to oversee our planned clinical trials investigating the Hemopurifier for oncology indications. Pursuant to the agreement, NAMSA agreed
to manage our planned clinical trials of the Hemopurifier for patients in the United States and Australia with various types of cancer
tumors.
 
We recently completed an in vitro binding study of relevant oncology
targets, to provide pre-clinical evidence to support our trial design and translational endpoints. Our study indicated positive results
from this study, providing evidence that our Hemopurifier removes extracellular vesicles, or EVs, from plasma. This translational study
provides pre-clinical evidence to support our planned phase 1 safety, feasibility and dose-finding clinical trials of our Hemopurifier
in patients with solid tumors who have stable or progressive disease during anti-PD-1 monotherapy treatment, such as Keytruda® or
Opdivo®. In addition to an interested initial trial site in India, we had three interested sites in Australia that were awaiting our
completion of this in vitro binding study. We added the data from this study to our Clinical Investigator Brochure and submitted
that brochure to the Ethics Committee of Royal Adelaide Hospital in Australia and in June 2024, we received approval for our proposed
phase 1 oncology trial from the Ethics Committee from Royal Adelaide Hospital. We are currently in the process of applying to the Ethics
Committees of the two additional interested clinical trial sites in Australia and the site in India.
 
Life-Threatening Viral Infections
 
We also believe that the Hemopurifier can be part of
the broad-spectrum treatment of life-threatening highly glycosylated, or carbohydrate coated, viruses that are not addressed with an already
approved treatment. In small-scale or early feasibility human studies, the Hemopurifier has been used in the past to treat individuals
infected with human immunodeficiency virus, or HIV, hepatitis-C and Ebola.
 
Additionally, in
vitro, the Hemopurifier has been demonstrated to capture Zika virus, Lassa virus, MERS-CoV, cytomegalovirus, Epstein-Barr virus,
Herpes simplex virus, Chikungunya virus, Dengue virus, West Nile virus, smallpox-related viruses, H1N1 swine flu virus, H5N1 bird
flu virus, Monkeypox virus and the reconstructed Spanish flu virus of 1918. In several cases, these studies were conducted in
collaboration with leading government or non-government research institutes.
 
 
 


 49 
 

 
We believe the Hemopurifier can be part of the treatment
of severe SARS-CoV-2 viremia/COVID-19, or COVID-19, cases. COVID viremia is detected in approximately 34% of patients and is associated
with severity, requirement for intensive care unit, or ICU, stay, development of multi-organ failure and poor outcomes. EVs and exosomal
miRNAs may play a role in the spread of infection as well as ongoing inflammation, development of coagulopathy and lung injury. Our proprietary
Galanthus nivalis agglutinin, or GNA, affinity resin has been shown to bind multiple clinically relevant SARS-CoV-2 variants. Furthermore,
studies have demonstrated in vitro removal of seven SARS-CoV2 variants (104 PFU/mL) in phosphate buffered saline passed over a
column of GNA affinity resin (1g) three times, with capture efficiencies between 53% and 89%.
 
On June 17, 2020, the FDA approved a supplement to
our open Investigational Device Exemption, or IDE, for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier
in patients with SARS-CoV-2/COVID-19, or COVID-19, in a new feasibility study. That study was designed to enroll up to 40 subjects
at up to 20 centers in the United States. Subjects were to have established laboratory diagnosis of COVID-19, be admitted to an ICU and
have acute lung injury and/or severe or life-threatening disease, among other criteria. Endpoints for this study, in addition to safety,
included reduction in circulating virus, as well as clinical outcomes (NCT # 04595903). In January 2021, the Hemopurifier was used to
treat a viremic patient, under our emergency use approval, with a predicted risk of mortality of 80% and the Hemopurifier was able to
reduce the patient’s SARS-CoV-2 plasma viral load by 58.4%. In June 2022, the first patient in this study was enrolled and
completed the Hemopurifier treatment phase of the protocol. Due to the lack of COVID-19 patients in the ICUs of our trial sites, we terminated
this study in 2022. However, our IDE for this indication remains open, as we have an active COVID-19 trial in India and wish to preserve
the option of enrolling patients if the situation with COVID-19 changes.
 
Under Single Patient Emergency Use regulations, Aethlon
has treated two patients with COVID-19 with the Hemopurifier, in addition to the COVID-19 patient treated with our Hemopurifier in our
COVID-19 clinical trial discussed above.
 
We previously reported a disruption in our Hemopurifier
supply, as our then existing supply of Hemopurifiers expired on September 30, 2022 and, also as previously disclosed, we are dependent
on FDA approval of qualified suppliers to manufacture our Hemopurifier. We recently completed final testing in order to begin manufacturing
Hemopurifiers at our new manufacturing facility in San Diego, California for use in planned U.S. clinical trials, using GNA from our current
supplier.
 
In April 2024, we received a notice of approval from
the FDA for our IDE supplement to add our San Diego manufacturing facility and we now are able to manufacture Hemopurifiers at this site.
We also have sufficient Hemopurifiers on hand for use in our planned Australia and India oncology trials. Our intended transition to a
new supplier for GNA, a component of our Hemopurifier, continues to be delayed as we work with the FDA for approval of our supplement
to our IDE, which is required to make this manufacturing supplier change. We are working with the FDA to qualify this second supplier
of our GNA.
 
We also obtained ethics review board, or ERB, approval
from and entered into a clinical trial agreement with Medanta Medicity Hospital, a multi-specialty hospital in Delhi NCR, India, for a
COVID-19 clinical trial at that location. We now have two sites in India for this trial with the Medanta Medicity Hospital and Maulana
Azad Medical College, or MAMC. One patient has been treated to date; however, we have been informed by our CRO that a new COVID-19 subvariant
was detected in India recently. Our COVID-19 trial in India remains open in the event that there are COVID-19 admissions to the ICUs at
our sites in India.
 
In May 2023, we received ERB approval from the MAMC,
for a second site for our clinical trial in India to treat severe COVID-19. MAMC was established in 1958 and is located in New Delhi,
India. MAMC is affiliated with the University of Delhi and is operated by the Delhi government. 
 
 
 
 
 


 50 
 

 
Organ Transplantation
 
Additionally, based on preclinical
data with acellular kidney perfusates, we believe that the Hemopurifier has potential applications in organ transplantation. We are investigating
whether the Hemopurifier, when incorporated into a machine perfusion organ preservation circuit, can remove harmful viruses, exosomes,
RNA molecules, cytokines, chemokines and other inflammatory molecules from recovered organs. We initially are focused on recovered kidneys
from deceased donors. We have previously demonstrated the removal of multiple viruses and exosomes and exosomal particles from buffer
solutions, in vitro, utilizing a scaled-down version of our Hemopurifier and believe this process could reduce transplantation
complications by improving graft function, reducing graft rejection, maintaining or improving organ viability prior to transplantation,
and potentially reducing the number of kidneys rejected for transplant.
 
Successful outcomes of human
trials will also be required by the regulatory agencies of certain foreign countries where we plan to market and sell the Hemopurifier.
Some of our patents may expire before FDA approval or approval in a foreign country, if any, is obtained. However, we believe that certain
patent applications and/or other patents issued to us more recently will help protect the proprietary nature of our Hemopurifier treatment
technology.
 
In addition
to the foregoing, we are monitoring closely the impact of inflation, recent bank failures and the war between Russia and Ukraine and the
military conflicts in Israel and the surrounding areas, as well as related political and economic responses and counter-responses by various
global factors on our business. Given the level of uncertainty regarding the duration and impact of these events on capital markets and
the U.S. economy, we are unable to assess the impact on our timelines and future access to capital. The full extent to which inflation,
recent bank failures and the ongoing military conflicts will impact our business, results of operations, financial condition, clinical
trials and preclinical research will depend on future developments, as well as the economic impact on national and international markets
that are highly uncertain.
 
Our executive offices are located
at 11555 Sorrento Valley Road, Suite 203, San Diego, California 92121. Our telephone number is (619) 941-0360. Our website address is
www.aethlonmedical.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated
into, this Annual Report.
 
Our common stock is listed on
the Nasdaq Capital Market under the symbol “AEMD.”
 
Fiscal Years Ended March 31, 2024 and 2023
 
Results of Operations
 
Government Contract Revenues
 
For the fiscal year ended March 31, 2024, we did not have any active revenue-generating
government contracts and, consequently, did not record any government contract revenue for that period.
 
For the fiscal year ended March 31, 2023, we recorded government contract
revenue of $574,245 resulting from work performed under our government contract Phase 2 Melanoma Cancer with NIH. 
 

Phase 2 Melanoma Cancer Contract
 
On September 12, 2019, the NCI
awarded to us the Award Contract. The Award Contract amount was $1,860,561 and, as amended, ran for the period from September 16, 2019
through September 15, 2022.
 
We presented the required final
report to the NCI. As the NCI completed its close out review of the contract, we recognized as revenue $574,245 on our statement of operations
for the fiscal year ended March 31, 2023.
 
 
 


 51 
 

 
Operating Costs and Expenses
 
Consolidated operating expenses
were $12,636,568 for the fiscal year ended March 31, 2024, compared to $12,472,883 for the fiscal year ended March 31, 2023, an increase
of $163,685. The $163,685 increase in the fiscal year ended March 31, 2024 was due to an increase in payroll and related expenses of $762,899
partially offset by a decrease of $578,112 in general and administrative expenses and a decrease of $21,102 in professional fees.  
 
The $762,899 increase in the fiscal
year ended March 31, 2024 in our payroll and related expenses was primarily due to an increase in separation expenses of $861,994 for
a former executive and an increase of $126,571 associated with an increase in average headcount, partially offset by a decrease in stock-based
compensation of $225,666.
 
The $578,112 decrease in the
fiscal year ended March 31, 2024 in our general and administrative expenses was primarily driven by the following: a decrease of $819,327
in clinical trial expenses related to the closed U.S. COVID-19 clinical trial, a decrease of $279,504 in subcontract expense related to
contracts and grants with the NIH, a $98,755 decrease in rent expense associated with a mobile clean room leased in the prior year, a
decrease of $29,849 in travel related expenses associated with a former remote employee and a decrease of $22,053 expenses related to
various other general office operating expenses. These decreases were partially offset by an increase of $404,918 in manufacturing and
research and development supplies related to the manufacturing of our Hemopurifier device and various research and development activities.
Other increases included $118,165 in depreciation expense and amortization expense related to leasehold improvements to our manufacturing
space, $69,894 increase in insurance expenses to include medical, D&O and liability, an increase of $82,421 primarily related to our
manufacturing facility, encompassing equipment maintenance, utilities, and outside services.
 
The decrease in professional
fees of $21,102 in the fiscal year ended March 31, 2024 was primarily due to a decrease in outside scientific, product research and regulatory
services of $302,390, a decrease of $60,229 in recruiting fees and a $32,631 decrease in legal fees. These decreases were partially offset
by increases in investor relations of $151,475, accounting fees of $137,026, board of director fees of $33,750 and outside operational
and administration expenses of $53,964.
 
As a result of the above factors,
our net loss increased to $12,208,174 for the fiscal year ended March 31, 2024, from $12,029,786 for the fiscal year ended March 31, 2023.
 
Liquidity and Capital Resources
 
As of March 31, 2024, we had
a cash balance of $5,441,978 and working capital of $4,395,889. This compares to a cash balance of $14,532,943 and working capital of
$13,585,478 at March 31, 2023.
 
On May 17, 2024, we closed a public
offering pursuant to which we sold an aggregate of: (i) 2,450,000 shares of our common stock and accompanying Class A warrants to purchase
up to 2,450,000 shares of common stock and Class B warrants to purchase up to 2,450,000 shares of common stock, at a combined public offering
price of $0.58 per share and accompanying warrants; and (ii) in lieu of common stock, pre-funded warrants to purchase 5,650,000 shares
of common stock and accompanying Class A warrants to purchase up to 5,650,000 shares of common stock and Class B warrants to purchase
up to 5,650,000 shares of common stock, at a combined public offering price of $0.579 per pre-funded warrant and accompanying warrants,
which is equal to the public offering price per share of common stock, and accompanying warrants less the $0.001 per share exercise price
of each such pre-funded warrant. The gross proceeds from the offering, before deducting the placement agent’s fees and other offering
expenses, were approximately $4.7 million. In June 2024, holders of Class A and Class B warrants exercised 295,000
shares and 2,875,000 shares, respectively, for total proceeds of $1,838,600.
 
While we currently have over
$9.1 million in cash and cash equivalents and have been carrying out certain expense reductions since November 2023, our planned expense
reductions may not materialize and/or our patient recruitment may occur more rapidly than expected along with the concomitant increases
in expenses, there is substantial doubt that our cash on hand will carry the company for 12 months beyond the filing date of the financial
statements included in this Annual Report.
 
 
 
 


 52 
 

 

During the fiscal years ended
March 31, 2024 and 2023, we raised capital only through our At The Market Offering Agreement, or the 2022 ATM Agreement, with H.C. Wainwright
& Co., LLC, or Wainwright.
 
2022 At The Market Offering Agreement with H.C.
Wainwright & Co., LLC
 
On March 24, 2022, we entered
into the 2022 ATM Agreement with Wainwright, which established an at-the-market equity program pursuant to which we may offer and sell
shares of our common stock from time to time as set forth in the 2022 ATM Agreement.
 
The offering was registered under
the Securities Act pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-259909), as previously filed
with the SEC and declared effective on October 21, 2021. We filed a prospectus supplement, dated March 24, 2022, with the SEC that provides
for the sale of shares of our common stock, or the 2022 ATM Shares, having an aggregate offering price of up to $15,000,000, which was
subsequently and most recently updated pursuant to our prospectus supplement, dated September 29, 2022, filed with the SEC that provides
for the sale of 2022 ATM Shares having an aggregate offering price of up to $6,625,000. As of March 31, 2024, $5,302,617 of 2022 ATM Shares
remained available for sale under the 2022 ATM Agreement.
 
Under the 2022 ATM Agreement,
Wainwright may sell the 2022 ATM Shares by any method permitted by law and deemed to be an “at the market offering” as defined
in Rule 415 promulgated under the Securities Act, including sales made directly on the Nasdaq Capital Market, or on any other existing
trading market for the 2022 ATM Shares. In addition, under the 2022 ATM Agreement, Wainwright may sell the 2022 ATM Shares in privately
negotiated transactions with our consent and in block transactions. Under certain circumstances, we may instruct Wainwright not to sell
the 2022 ATM Shares if the sales cannot be effected at or above the price designated by us from time to time.
 
We are not obligated to make any
further sales of the 2022 ATM Shares under the 2022 ATM Agreement. The offering of the 2022 ATM Shares pursuant to the 2022 ATM Agreement
will terminate upon the termination of the 2022 ATM Agreement by Wainwright or us, as permitted therein.
 
The 2022 ATM Agreement contains
customary representations, warranties and agreements by us, and customary indemnification and contribution rights and obligations of the
parties. We agreed to pay Wainwright a placement fee of up to 3.0% of the aggregate gross proceeds from each sale of the 2022 ATM Shares.
We also agreed to reimburse Wainwright for certain specified expenses in connection with entering into the 2022 ATM Agreement.
 
Financings During the Fiscal Year Ended March
31, 2024:
 
In the fiscal year ended March
31, 2024, we raised aggregate net proceeds of $1,322,383, net of $34,118 in commissions to Wainwright and $8,202 in other offering expense,
through the sale of 296,056 shares of our common stock at an average price of $4.47 per share under the 2022 ATM Agreement.
 
Financings During the Fiscal Year Ended March
31, 2023:
 
During
the fiscal year ended March 31, 2023, we raised aggregate net proceeds of $8,927,211, net of $229,610 in commissions to Wainwright and
$27,153 in other offering expense, through the sale of 748,084 shares of our common stock at an average price of $11.93 per share under
the 2022 ATM Agreement.
 
Material Cash Requirements 
 
We expect our clinical trial expenses
for the planned oncology trials in Australia and India to increase for the foreseeable future. Those increases in clinical trial expenses
include the cost of manufacturing additional Hemopurifiers.
 
In addition, we have entered into
leases for our headquarters, laboratory and manufacturing facilities. We expect our rent payments to continue to increase for the foreseeable
future.
 
 
 


 53 
 

 
Future capital requirements will
depend upon many factors, including progress with pre-clinical testing and clinical trials, the number and breadth of our clinical programs,
the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, the
time and costs involved in obtaining regulatory approvals, competing technological and market developments, as well as our ability to
establish collaborative arrangements, effective commercialization, marketing activities and other arrangements. We expect to continue
to incur increasing negative cash flows and net losses for the foreseeable future. We will continue to need to raise additional capital
either through equity and/or debt financing for the foreseeable future.
 
As a result of global events,
political changes, bank failures, actual or perceived changes in interest rates and economic inflation, the global credit and financial
markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence,
declines in economic growth, increases in inflation and uncertainty about economic stability. There can be no assurance that further deterioration
in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may
make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Any of these actions could materially
harm our business, results of operations and future prospects.
 
While we currently have over $9.1
million in cash and cash equivalents and have been carrying out certain expense reductions since November 2023, our planned additional
expense reductions may not materialize and/or our patient recruitment may occur more rapidly than expected along with the concomitant
increases in expenses; therefore there is substantial doubt that our cash on hand will carry the company for 12 months beyond the filing
date of the financial statements included in this Annual Report.
 
We do plan to access the equity
markets for additional capital, however, there can be no assurance that we will be able to access such additional capital.
 
Our ability to raise additional
funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and
financial markets in the United States, including due to bank failures, actual or perceived changes
in interest rates and economic inflation, and worldwide resulting from macroeconomic factors. Because of the numerous risks and
uncertainties associated with product development, we cannot predict the timing or amount of increased expenses and we may never be profitable
or generate positive cash flow from operating activities.
 
Cash Flows
 
Cash flows from operating, investing
and financing activities, as reflected in the accompanying Consolidated Statements of Cash Flows, are summarized as follows (in thousands):
 


  
For the year ended 

  
March 31,  2024  
March 31,  2023 

Cash (used in) provided by: 
    
   

Operating activities 
$(10,130) 
$(10,505)

Investing activities 
 (251) 
 (943)

Financing activities 
 1,288  
 8,915 

Effect of exchange rate on cash 
 2  
 (6)

Net decrease in cash 
$(9,091) 
$(2,539)

 
 
 


 54 
 

 
Net Cash Used in Operating Activities
 
We used cash in our operating
activities due to our losses from operations. Net cash used in operating activities was approximately $10,130,000 in fiscal 2024, compared
to net cash used in operating activities of approximately $10,505,000 in fiscal 2023, a decrease of approximately $375,000. The decrease
in cash flows was primarily driven by a positive change in our working capital items of $413,000 mainly from the increase in accounts
payable and accrued expenses offset by an increase in net loss of approximately $38,000 before non-cash items.
 
Net Cash Used in Investing Activities
 
During the fiscal years ended
March 31, 2024 and 2023, we purchased approximately $251,000 and $943,000 of equipment, respectively.
 
Net Cash from Financing Activities
 
Net cash generated from financing
activities decreased from approximately $8,915,000 in the fiscal year ended March 31, 2023 to approximately $1,288,000 in the fiscal year
ended March 31, 2024.
 
In the fiscal year ended March
31, 2024, we raised approximately $1,322,383 from the issuance of common stock, which was partially offset by the use of approximately
$35,000 to pay for the tax withholding on the issuance of restricted stock units, or RSUs. During the fiscal year ended March 31, 2023,
we raised $8,927,211 from the issuance of common stock, which was partially offset by the use of approximately $12,000 to pay for the
tax withholding on the issuance of RSUs.
 
Critical Accounting Policies and Significant Judgments and Estimates
 
The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires us
to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements. These estimates and assumptions affect the reported amounts of expenses
during the reporting period. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other
factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ
from these estimates under different future conditions.
 
We believe that the estimates
and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require the
most difficult, subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us.
 
There were no accounting estimates
in the year ended March 31, 2024 with a high degree of uncertainty or amounts that are with a high likelihood to change from period to
period that would materially impact the presentation of our financial statements for the year ended March 31, 2024.
  
Share-based Compensation
 
We account for share-based compensation
awards using the fair-value method and record such expense based on the grant date fair value in the consolidated financial statements
over the requisite service period.
 
 
 


 55 
 

 
RSU Grants to Non-Employee Directors
 
The Company maintains the Amended
and Restated Non-Employee Director Compensation Policy, or the Director Compensation Policy, which provides for cash and equity compensation
for persons serving as non-employee directors of the Company. Under this policy, each new director receives either stock options or a
grant of RSUs upon appointment/election, as well as either an annual grant of stock options or of RSUs at the beginning of each fiscal
year. The (i) stock options are subject to vesting and (ii) RSUs are subject to vesting and represent the right to be issued on a future
date shares of our common stock upon vesting.
 
On
April 16, 2024, our Board of Directors approved, pursuant to the terms of the Director Compensation Policy, the grant of the annual RSUs
under the Director Compensation Policy to each of the four non-employee directors of the Company then serving on the Board of Directors.
The Director Compensation Policy provides for a grant of stock options or $50,000 worth of RSUs at the beginning of each fiscal year for
current non-employee directors then serving on the Board of Directors, and for a grant of stock options or $75,000 worth of RSUs for a
newly elected non-employee director, with each RSU priced at the average for the closing prices for the five days preceding and including
the date of grant, or $1.52 per share for the RSUs granted in April 2024. As a result, in April 2024 the four eligible directors were
each granted an RSU in the amount of 32,894 shares under the Company’s 2020 Equity Incentive Plan, or the 2020 Plan. The
RSUs are subject to vesting in four equal installments, with 25% of the restricted stock units vesting on each of June 30, 2024, September
30, 2024, December 31, 2024, and March 31, 2025, subject in each case to the director’s Continuous Service (as defined in the 2020
Plan), through such dates. Vesting will terminate upon the director’s termination of Continuous Service prior to any vesting date.
 
There were no vested RSUs outstanding
as of March 31, 2024.
 
Recent Events 
 
On May 17, 2024, we closed a public
offering pursuant to which we sold an aggregate of: (i) 2,450,000 shares of our common stock and accompanying Class A warrants to purchase
up to 2,450,000 shares of common stock and Class B warrants to purchase up to 2,450,000 shares of common stock, at a combined public offering
price of $0.58 per share and accompanying warrants; and (ii) in lieu of common stock, pre-funded warrants to purchase 5,650,000 shares
of common stock and accompanying Class A warrants to purchase up to 5,650,000 shares of common stock and Class B warrants to purchase
up to 5,650,000 shares of common stock, at a combined public offering price of $0.579 per pre-funded warrant and accompanying warrants,
which is equal to the public offering price per share of common stock, and accompanying warrants less the $0.001 per share exercise price
of each such pre-funded warrant.
 
The Class A and Class B warrants
each have an exercise price of $0.58 per share, are immediately exercisable, and, in the case of Class A warrants, will expire on May
17, 2029, and in the case of Class B warrants, will expire on May 19, 2025. The exercise price of the Class A and Class B warrants is
also subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in such warrants. Maxim Group
LLC acted as the exclusive placement agent for the offering.
 
The gross proceeds from the offering,
before deducting the placement agent’s fees and other offering expenses, were approximately $4.7 million. The Company intends to
use the net proceeds from this offering for general corporate purposes, which may include clinical trial expenses, research and development
expenses, capital expenditures and working capital.
 
In June 2024, holders of Class
A and Class B warrants exercised 295,000 shares and 2,875,000 shares, respectively, for total proceeds of $1,838,600.
 
 
 


 56 
 

 
RSU Grants
 
In April 2024, our Board of Directors
approved, pursuant to the terms of the Director Compensation Policy, the grant of the annual RSUs under the Director Compensation Policy
to each of the four non-employee directors of the Company then serving on the Board of Directors. The Director Compensation Policy provides
for a grant of stock options or $50,000 worth of RSUs at the beginning of each fiscal year for current non-employee directors then serving
on the Board of Directors, and for a grant of stock options or $75,000 worth of RSUs for a newly elected non-employee director, with each
RSU priced at the average for the closing prices for the five days preceding and including the date of grant, or $1.52 per share for the
April 2024 RSU grants. As a result, in April 2024 the four eligible directors were each granted an RSU in the amount of 32,894 shares
under the 2020 Plan. The RSUs are subject to vesting in four equal installments, with 25% of the restricted stock units vesting on each
of June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025, subject in each case to the director’s Continuous Service
(as defined in the 2020 Plan), through such dates. Vesting will terminate upon the director’s termination of Continuous Service
prior to any vesting date.
 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not applicable to a “smaller
reporting company” as defined under Item 10(f)(1) of Regulation S-K of the Securities Act.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 


 
Pages

Report of Independent Registered Public Accounting Firm (Baker Tilly US, LLP, San Diego, CA PCAOB ID No. 23)
F-2

Consolidated Balance Sheets
F-3

Consolidated Statements of Operations
F-4

Consolidated Statements of Equity
F-5

Consolidated Statements of Cash Flows
F-6

Notes to Consolidated Financial Statements
F-7

 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
 
None.
 
ITEM 9A. CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
 
We maintain “disclosure
controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information
required to be disclosed, in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Interim
Chief Executive Officer and Chief Financial Officer (who is our principal executive officer and principal financial officer), to allow
timely decisions regarding required disclosures.
 
In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period
covered by this Annual Report under the supervision and with the participation of our management, including our Interim Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.
 
 
 


 57 
 

 

Internal Control over Financial Reporting
 


(a)
Management’s Report on Internal Control Over Financial Reporting 

 
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.
  
Under the supervision and with the participation of
our management, including our Interim Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting as of March 31, 2024. According to the guidelines established by Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, one or more material weaknesses renders a company’s
internal control over financial reporting ineffective. Based on this evaluation, we have concluded that our internal control over financial
reporting was not effective as of March 31, 2024 due to the material weaknesses described below.
 
Description of Material Weaknesses
 
Based on such evaluation,
management identified a material weakness in the segregation of duties within our financial systems. Specifically, user access controls
were not sufficiently maintained to properly restrict both user and privileged access to financial applications within our accounting
software system to initiate, record and approve entries. Also noted that check stock was secured in an authorized signatory’s office.
 
It is difficult to design
and maintain appropriate segregation of duties in the initiation, recording, and approval of transactions within financial systems with
a limited number of personnel. This, coupled with management having not designed and maintained user access controls that adequately
restrict user and privileged access to financial applications, and the absence of sufficient other mitigating controls, created a segregation
of duties weakness which could potentially have resulted in a material misstatement. Management has identified remediation actions that
may require the addition of personnel to the finance and accounting function or a change in accounting software, which will allow the
Company to design the control environment in a manner that provides effective segregation of duties. Management has identified certain
actions beyond staff changes or accounting software changes. As of May 2024, the accounting software was updated, and distinct user roles
were created. Transactions are recorded by personnel who are independent of those who initiate them and are approved by separate personnel
who are independent of those who record them. Additionally, check stock was relocated in November 2023.
 
During 2017 through 2020,
the Company incorrectly recorded accrued commission liability of approximately $404,000. The Company reversed accrued commission liability
of approximately $404,000 during the year ended March 31, 2024 related to this error in accounting under U.S. GAAP. The Company originally
failed to correctly apply appropriate accounting principles in recording the transaction, and the error was not detected and corrected
in a timely manner, resulting in an adjustment to the financial statements.
 
Management has discussed with counsel appropriate
measures to record such potential commission liabilities in the future and will implement a quarterly review of all accruals. The reversal
of the accrued commission liability into equity as of March 31, 2024 corrected the impact of the error. The Company is in the process
of implementing quarterly review controls over review and assessment of accruals. This plan, with oversight from our Audit Committee,
is in the process of implementation in response to the identified material weakness.
 

Limitation on Effectiveness of Controls
 
In designing and evaluating our
disclosure controls and procedures, management recognized that any disclosure controls and procedures, no matter how well designed and
operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. No evaluation of internal
control can provide absolute assurance that all internal control issues and instances of fraud, if any, within a company are detected.
In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls
and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. In addition,
the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may
become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of
the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
 


(b)
Changes in Internal Control Over Financial Reporting

 
There was no change in our internal
control over financial reporting during the last fiscal quarter ended March 31, 2024 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
 
 
 


 58 
 

 
ITEM 9B. OTHER INFORMATION
 
On June 27, 2024, we received
a letter, or Notice, from The Nasdaq Stock Market, or Nasdaq, advising us that for 31 consecutive trading days preceding the date of the
Notice, the bid price of our common stock had closed below the $1.00 per share minimum required for continued listing on The Nasdaq Capital
Market pursuant to Nasdaq Listing Rule 5550(a)(2), or the Minimum Bid Price Requirement. The Notice has no effect on the listing of our
common stock at this time, and our common stock continues to trade on The Nasdaq Capital Market under the symbol “AEMD.”
 
In accordance with Nasdaq
Listing Rule 5810(c)(3)(A), we have 180 calendar days to regain compliance with the Minimum Bid Requirement, or the Grace Period, subject
to a potential 180 calendar day extension, as described below. To regain compliance, the closing bid price of our common stock must be
at least $1.00 per share for a minimum of ten consecutive business days within the Grace Period.
 
If we do not achieve compliance
with the Minimum Bid Requirement by December 24, 2024, the end of the Grace Period, we may be eligible for an additional 180 calendar
day period to regain compliance. To qualify, we would be required to meet the continued listing requirement for the market value of our
publicly held shares and all other Nasdaq initial listing standards, with the exception of the bid price requirement, and would need to
provide written notice of our intention to cure the deficiency during the second compliance period. However, if it appears to Nasdaq staff
that we will not be able to cure the deficiency, or if we do not meet the other listing standards, Nasdaq could provide notice that our
common stock will be subject to delisting. In the event we receive notice that our common stock is being delisted, we would be entitled
to appeal the determination to a Nasdaq Listing Qualifications Panel and request a hearing.
 
We intend to monitor the closing
bid price of our common stock and may, if appropriate, consider implementing available options to regain compliance with the Minimum Bid
Price Requirement.

  
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
 
Not applicable.
 
 
 
 
 
 
 
 
 
 
 
 
 


 59 
 

 
PART III
 
Certain information required by
Part III is omitted from this Annual Report and incorporated by reference to our definitive proxy statement for our 2024 Annual Meeting
of Stockholders, or the Proxy Statement, to be filed pursuant to Regulation 14A of the Exchange Act. If our Proxy Statement is not filed
within 120 days after the end of the fiscal year covered by this Annual Report, the omitted information will be included in an amendment
to this Annual Report filed not later than the end of such 120-day period.
 
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
Except as set forth below, the
information required by this item will be contained in the sections titled “Information About our Board of Directors and Executive
Officers,” “Information About our Board of Directors and Executive Officers – Code of Ethics,” “Information
About our Board of Directors and Executive Officers – Information Regarding Committees of the Board of Directors – Nominating
and Corporate Governance Committee,” “Information About our Board of Directors and Executive Officers – Information
Regarding Committees of the Board of Directors – Audit Committee and Audit Committee Financial Expert,” “Information
About our Board of Directors and Executive Officers – Information Regarding Committees of the Board of Directors – Compensation
Committee” and “Executive and Director Compensation” in our Proxy Statement and is incorporated herein by reference.
 
We maintain a Code of Business
Conduct and Ethics that applies to all our employees, officers and directors. This includes our principal executive officer, principal
financial officer and principal accounting officer or controller, or persons performing similar functions. The full text of our Code of
Business Conduct and Ethics is posted on our website at www.aethlonmedical.com on the “Governance” page of the section titled
“Investors.” If we make any substantive amendments to the Code of Business Conduct and Ethics or grant any waiver from a provision
of the Code of Business Conduct and Ethics to any executive officer or director that are required to be disclosed pursuant to SEC rules,
we will promptly disclose the nature of the amendment or waiver on our website or in a current report on Form 8-K. Information contained
in, or that can be accessed through, our website is not incorporated by reference herein, and you should not consider information on our
website to be part of this Annual Report.
 
ITEM 11. EXECUTIVE COMPENSATION
 
The information required by this
item will be contained in the sections titled “Executive and Director Compensation” and “Information About our Board
of Directors and Executive Officers – Information Regarding Committees of the Board of Directors – Compensation Committee”
in our Proxy Statement and is incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS 
 
The information required by this
item will be contained in the sections titled “Security Ownership of Certain Beneficial Owners and Management” and “Executive
and Director Compensation – Narrative Disclosure to Executive Summary – Equity-Based Incentive Awards” in our Proxy
Statement and is incorporated herein by reference.
   
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
 
The information required by this
item will be contained in the sections titled “Information About our Board of Directors and Executive Officers – Board of
Directors” and “Certain Relationships and Related Transactions” in our Proxy Statement and is incorporated herein by
reference.
  
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The information required by this
item will be contained in the section titled “Ratification of Appointment of Independent Registered Public Accounting Firm”
in our Proxy Statement and is incorporated herein by reference.
 
 
 


 60 
 



 
PART IV
 
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
The following documents are filed as part of this Annual Report:
 
(a)(1) Financial Statements.
The response to this portion of Item 15 is set forth
under Part II, Item 8 above.
 
(a)(2) Financial Statement Schedules.
 
All schedules have been omitted
because they are not required or because the required information is given in the Financial Statements or Notes thereto set forth under
Item 8 above.
 
(a)(3) Exhibits required by Item 601 of Regulation
S-K.
 


 
 
 
 
Incorporated by Reference

Exhibit
Number
 
Exhibit
    Description
 
Form
 
SEC
    File No.
 
Exhibit
    
    No.
 
Date
 
Filed Herewith

3.1
 
Articles of Incorporation, as amended.
 
8-K
 
001-37487
 
3.1
 
September 19, 2022
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

3.2
 
Amended and Restated Bylaws of the Company.
 
8-K
 
001-37487
 
3.1
 
September 12, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.1
 
Form of Common Stock Certificate.
 
S-1
 
333-201334
 
4.1
 
December 31, 2014
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.2
 
Form of Warrant to Purchase Common Stock.
 
S-1/A
 
333-234712
 
4.14
 
December 11, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.3
 
Form of Underwriter Warrant.
 
S-1/A
 
333-234712
 
4.15
 
December 11, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.4
 
Form of Common Stock Purchase Warrant.
 
8-K
 
001-37487
 
4.1
 
January 17, 2020
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.5
 
Form of Class A Warrant to Purchase Common Stock, issued on May 17, 2024.

 
8-K
 
001-37487
 
4.1
 
May 17, 2024
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.6
 
Form of Class B Warrant to Purchase Common Stock, issued on May 17, 2024.
 
8-K
 
001-37487
 
4.2
 
May 17, 2024
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.7
 
Form of Pre-Funded Warrant to Purchase Common Stock, issued on May 17, 2024.

 
8-K
 
001-37487
 
4.3
 
May 17, 2024
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.8
 
Form of Placement Agent Warrant to Purchase Common Stock, issued on May 17, 2024.
 
8-K
 
001-37487
 
4.4
 
May 17, 2024
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

4.9
 
Description of Aethlon Medical, Inc.’s Securities.
 
10-K 
 
001-37487
 
4.16
 
June 25, 2020
 
 

 

 

 61 
 


 



 
 
 
 
Incorporated by Reference

Exhibit
Number
 
Exhibit
    Description
 
Form
 
SEC
    File No.
 
Exhibit
    
    No.
 
Date
 
Filed Herewith

10.1++
 
Aethlon Medical, Inc. Amended and Restated Non-Employee Director Compensation Policy, as Modified on February 10, 2022.
 
10-Q
 
001-37487
 
10.2
 
February 14, 2022
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.2++
 
Employment Agreement, by and between Aethlon Medical, Inc. and James Frakes, dated December 12, 2018.
 
10-Q
 
001-37487
 
10.3
 
February 11, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.3++
 
Amendment No. 1 to Executive Employment Agreement, effective as of November 7, 2023, by and between the Company and James B. Frakes.
 
8-K
 
001-37487
 
10.1
 
December 22, 2023
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.4++
 
Form of Indemnification Agreement for Officers and Directors.
 
10-Q
 
001-37487
 
10.4
 
February 11, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.5++
 
Form of Option Grant Agreement for Officers and Directors.
 
10-Q
 
001-37487
 
10.5
 
February 11, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.6++
 
Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement for Directors.
 
10-Q
 
001-37487
 
10.6
 
February 11, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.7++
 
Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement for Executives.
 
10-Q
 
001-37487
 
10.7
 
February 11, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.8
 
Assignment Agreement, by and between Aethlon Medical, Inc. and London Health Sciences Center Research Inc., dated November 7, 2006.
 
S-1 
 
001-37487
 
10.27
 
November 15, 2019
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.9++
 
Aethlon Medical, Inc. 2020 Equity Incentive Plan, Form of Restricted Stock Grant, Form of Option Grant and Agreement.
 
8-K
 
001-37487
 
99.1
 
September 19, 2022
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.10++
 
Employment Agreement between the Company and Dr. Fisher, dated October 30, 2020.
 
8-K
 
001-37487
 
10.2
 
November 3, 2020
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.11++
 
Separation Agreement between the Company and Dr. Fisher, effective as of November 27, 2023.
 
8-K
 
001-37487
 
10.1
 
November 27, 2023
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.12
 
Lease, by and between the Company and San Diego Inspire 1, LLC. and San Diego Inspire 2, LLC, effective December 7, 2020.
 
10-Q
 
001-37487
 
10.3
 
February 10, 2021
 
 

 
 
 


 62 
 

 


 
 
 
 
Incorporated by Reference

Exhibit
Number
 
Exhibit
    Description
 
Form
 
SEC
    File No.
 
Exhibit
    
    No.
 
Date
 
Filed Herewith

10.13++
 
Executive Employment Agreement between the Company and Guy Cipriani, dated January 1, 2021.
 
10-Q
 
001-37487
 
10.5
 
February 10, 2021
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.14++
 
Amendment No. 1 to Executive Employment Agreement, effective as of November 7, 2023, by and between the Company and Guy F. Cipriani.
 
8-K
 
001-37487
 
10.2
 
December 22, 2023
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.15++
 
Executive Employment Agreement between the Company and Steven P. LaRosa, MD, dated January 4, 2021.
 
10-Q
 
001-37487
 
10.6
 
February 10, 2021
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.16++
 
Executive Employment Agreement, by and between Aethlon Medical, Inc. and Lee D. Arnold, Ph.D., dated February 1, 2023.
 
10-Q
 
001-37487
 
10.1
 
February 13, 2023
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.17
 
Lease between Aethlon Medical, Inc. and San Diego Inspire 5, LLC, effective October 27, 2021.
 
10-Q
 
001-37487
 
10.1
 
November 9, 2021
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.18
 
At the Market Offering Agreement, dated March 24, 2022, by and between Aethlon Medical, Inc. and H.C. Wainwright & Co., LLC.
 
8-K
 
001-37487
 
1.1
 
March 24, 2022
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

10.19++
 
Amendment No. 1 to Executive Employment Agreement, by and between Aethlon Medical, Inc. and Lee D. Arnold, Ph.D., dated May 1, 2023.
 
10-K
 
001-37487
 
10.18
 
June 28, 2023
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

21.1
 
List of Subsidiaries.
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

23.1
 
Consent of Independent Registered Public Accounting Firm.
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

24.1
 
Power of Attorney (see signature page)
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

31.1
 
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

32.1*
 
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
 
 
 
 
 
 
 
 
 
X

 
 
 


 63 
 

 


 
 
 
 
Incorporated by Reference

Exhibit
Number
 
Exhibit
    Description
 
Form
 
SEC
    File No.
 
Exhibit
    
    No.
 
Date
 
Filed Herewith

97.1
 
Incentive Compensation Recoupment Policy.
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

101.INS
 
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File
    because its XBRL tags are embedded within the Inline XBRL document)
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

101.SCH
 
Inline XBRL Taxonomy Extension Schema Document
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

101.CAL
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

101.DEF
 
Inline XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

101.LAB
 
Inline XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

101.PRE
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
X

 
 
 
 
 
 
 
 
 
 
 
 
 

104
 
Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101)
 
 
 
 
 
 
 
 
 
X





__________________


 
++
Indicates management contract or compensatory plan.

  
*
The information in Exhibit 32.1 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act (including this Annual Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference.

 
ITEM 16. FORM 10-K SUMMARY
 
None.
 
 
 


 64 
 

 
SIGNATURES
 
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 27th day of
June, 2024.
 


 
By:
/s/ JAMES B. FRAKES
 

 
 

JAMES B. FRAKES
INTERIM CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER.
 

 
 
 
 

 
POWER OF ATTORNEY
 
KNOW ALL PERSONS BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints James B. Frakes his or her true and lawful attorney-in-fact and agent, with full
power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments
to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
 
Pursuant to the requirements of
the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
 


Signature
 
Title
 
Date

 
 
 
 
 

/s/ JAMES B. FRAKES
 
Interim Chief Executive Officer and Chief Financial Officer, Principal Executive Officer, Principal Financial and Accounting Officer and Director
 
June 27, 2024

James B. Frakes
 
 
 
 

 
 
 
 
 

 
 
 
 
 

/s/ EDWARD G. BROENNIMAN
 
Chairman and Director
 
June 27, 2024

Edward G. Broenniman
 
 
 
 

 
 
 
 
 

/s/ CHETAN S. SHAH
 
Director
 
June 27, 2024

Chetan S. Shah, M.D.
 
 
 
 

 
 
 
 
 

/s/ ANGELA ROSSETTI
 
Director
 
June 27, 2024

Angela Rossetti
 
 
 
 

 
 
 
 
 
 

/s/ NICOLAS GIKAKIS
 
Director
 
June 27, 2024

Nicolas Gikakis
 
 
 
 

 
 
 
 
 

 

 


 65 
 

 


 
Page

Consolidated Financial Statements 
 

 
 

Report of Independent Registered Public Accounting Firm (Baker Tilly US, LLP, San Diego, CA PCAOB ID No. 23)
F-2

 
 

Consolidated Balance Sheets as of March 31, 2024 and 2023
F-3

 
 

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended March 31, 2024 and 2023
F-4

 
 

Consolidated Statements of Equity for the Years Ended March 31, 2024 and 2023
F-5

 
 

Consolidated Statements of Cash Flows for the Years Ended March 31, 2024 and 2023
F-6

 
 

Notes to Consolidated Financial Statements
F-7

 
 
 
 
 
 
 
 
 
 
 
 

 F-1 
 


 
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
 
To the Stockholders and the Board of Directors of
Aethlon Medical, Inc.
 
Opinion on the Financial Statements
 
We have audited the accompanying consolidated balance
sheets of Aethlon Medical, Inc. and its subsidiary (the Company) as of March 31, 2024 and 2023, the related consolidated statements of
operations and comprehensive loss, equity and cash flows for the years then ended, and the related notes to the consolidated financial
statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for the years
then ended, in conformity with accounting principles generally accepted in the United States of America.
 
Going Concern Uncertainty
 
The accompanying consolidated financial statements
have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 of the consolidated financial statements,
the Company has recurring losses from operations, an accumulated deficit, expects to incur losses for the foreseeable future and requires
additional working capital. These are the reasons that raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not
contain any adjustments that might result from the outcome of this uncertainty.
 
Basis for Opinion
 
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
Critical Audit Matters
 
Critical audit matters are matters arising from the
current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:
(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective,
or complex judgments. We determined that there are no critical audit matters.
 
/s/ Baker Tilly US, LLP
 
We have served as the Company's auditor since 2001.
 
San Diego, California
June 27, 2024
 
 
 


 F-2 
 

 

AETHLON MEDICAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS



  
   
  

  
March 31, 

  
2024  
2023 

ASSETS 
    
   

CURRENT ASSETS 
    
   

Cash and cash equivalents 
$5,441,978  
$14,532,943 

Deferred offering costs 
 277,827  
 – 

Prepaid expenses and other current assets 
 505,983  
 557,623 

  
    
   

TOTAL CURRENT ASSETS 
 6,225,788  
 15,090,566 

  
    
   

Property and equipment, net 
 1,015,229  
 1,144,004 

Right-of-use lease asset, net 
 883,054  
 1,151,909 

Patents, net 
 1,100  
 1,650 

Restricted cash 
 87,506  
 87,506 

Deposits 
 33,305  
 33,305 

  
    
   

TOTAL ASSETS 
$8,245,982  
$17,508,940 

  
    
   

LIABILITIES AND STOCKHOLDERS’ EQUITY 
    
   

  
    
   

CURRENT LIABILITIES 
    
   

Accounts payable 
$777,862  
$432,889 

Due to related parties 
 546,434  
 214,221 

Lease liability, current portion 
 290,565  
 269,386 

Other current liabilities 
 215,038  
 588,592 

  
    
   

TOTAL CURRENT LIABILITIES 
 1,829,899  
 1,505,088 

  
    
   

Lease liability, less current portion 
 649,751  
 939,642 

  
    
   

TOTAL LIABILITIES 
 2,479,650  
 2,444,730 

  
    
   

COMMITMENTS AND CONTINGENCIES (Note 8) 
 –  
 – 

  
    
   

STOCKHOLDERS’ EQUITY 
    
   

Common stock, $0.001 par value, 60,000,000 shares authorized at March 31, 2024 and 2023; 2,629,725 and 2,299,259 shares issued and outstanding at March 31, 2024 and 2023, respectively 
 2,629  
 2,299 

Additional paid-in capital 
 160,337,371  
 157,426,606 

Accumulated other comprehensive loss 
 (6,940) 
 (6,141)

Accumulated deficit 
 (154,566,728) 
 (142,358,554)

  
    
   

TOTAL AETHLON MEDICAL, INC. STOCKHOLDERS’ EQUITY BEFORE NONCONTROLLING INTERESTS 
 5,766,332  
 15,064,210 

  
    
   

TOTAL STOCKHOLDERS’ EQUITY 
 5,766,332  
 15,064,210 

  
    
   

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 
$8,245,982  
$17,508,940 

 
See accompanying notes to the consolidated financial
statements.
 
 
 


 F-3 
 

 

AETHLON MEDICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS



  
   
  

  
Years Ended March 31, 

  
2024  
2023 

REVENUES: 
    
   

Government contract and grant revenue 
$–  
$574,245 

Total revenues 
 –  
 574,245 

  
    
   

OPERATING COSTS AND EXPENSES 
    
   

Professional fees 
 3,526,926  
 3,548,028 

Payroll and related expenses 
 5,206,451  
 4,443,552 

General and administrative 
 3,903,191  
 4,481,303 

Total operating expenses 
 12,636,568  
 12,472,883 

  
    
   

OPERATING LOSS 
 (12,636,568) 
 (11,898,638)

  
    
   

OTHER EXPENSE (INCOME) 
    
   

Loss on dissolution of subsidiary 
 –  
 142,121 

Interest income and other 
 (428,394) 
 (10,973)

Other expense (income) 
 (428,394) 
 131,148 

  
    
   

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS 
 (12,208,174) 
 (12,029,786)

  
    
   

Basic and diluted net loss per share attributable to common stockholders 
$(4.86) 
$(5.86)

  
    
   

Weighted average number of common shares outstanding - basic and diluted 
 2,512,774  
 2,053,744 

  
    
   

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS 
 (12,208,174) 
 (12,029,786)

  
    
   

OTHER COMPREHENSIVE LOSS 
 (799) 
 (6,141)

  
    
   

COMPREHENSIVE LOSS 
$(12,208,973) 
$(12,035,927)

 

See accompanying notes to the consolidated financial
statements.
 
 
 


 F-4 
 

 

AETHLON MEDICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED MARCH 31, 2024 AND 2023
 
 



  
   
   
   
   
   
   
  

 
ATTRIBUTABLE TO AETHLON
    MEDICAL, INC.  
   
   
  

  
COMMON STOCK  
ADDITIONAL  PAID IN  
ACCUMULATED  
ACCUMULATED  COMPREHENSIVE  
NON- CONTROLLING  
TOTAL 

  
SHARES  
AMOUNT  
CAPITAL  
DEFICIT  
LOSS  
INTERESTS  
EQUITY 

BALANCE - MARCH 31, 2022 
 1,541,926  
$1,542  
$147,460,747  
$(130,329,181) 
$–  
$(141,708) 
$16,991,400 

  
    
    
    
    
    
    
   

Issuances of common stock for cash
    under at the market program 
 748,084  
 748  
 8,926,463  
 –  
 –  
 –  
 8,927,211 

  
    
    
    
    
    
    
   

Issuance of common shares upon vesting
    of restricted stock units and net stock option exercise 
 9,249  
 9  
 (12,502) 
 –  
 –  
 –  
 (12,493)

  
    
    
    
    
    
    
   

Loss on dissolution of subsidiary 
 –  
 –  
 –  
 –  
 –  
 142,121  
 142,121 

  
    
    
    
    
    
    
   

Stock-based compensation expense 
 –  
 –  
 1,051,898  
 –  
 –  
 –  
 1,051,898 

  
    
    
    
    
    
    
   

Net loss 
 –  
 –  
 –  
 (12,029,373) 
 –  
 (413) 
 (12,029,786)

  
    
    
    
    
    
    
   

Other comprehensive loss 
 –  
 –  
 –  
 –  
 (6,141) 
 –  
 (6,141)

  
    
    
    
    
    
    
   

BALANCE - MARCH 31, 2023 
 2,299,259  
$2,299  
$157,426,606  
$(142,358,554) 
$(6,141) 
$–  
$15,064,210 

  
    
    
    
    
    
    
   

Issuances of common stock for cash
    under at the market program 
 296,056  
 296  
 1,322,087  
 –  
 –  
 –  
 1,322,383 

  
    
    
    
    
    
    
   

Rounding for reverse split 
 32  
 –  
 –  
 –  
 –  
 –  
 – 

  
    
    
    
    
    
    
   

Issuance of common shares upon vesting
    of restricted stock units 
 34,378  
 34  
 (34,812) 
 –  
 –  
 –  
 (34,778)

  
    
    
    
    
    
    
   

Reversal of accrued commission liability
    (see Note 6)  
 –  
 –  
 404,120  
 –  
 –  
 –  
 404,120 

  
    
    
    
    
    
    
   

Stock-based compensation expense 
 –  
 –  
 1,219,370  
 –  
 –  
 –  
 1,219,370 

  
    
    
    
    
    
    
   

Net loss 
 –  
 –  
 –  
 (12,208,174) 
 –  
 –  
 (12,208,174)

  
    
    
    
    
    
    
   

Other comprehensive loss 
 –  
 –  
 –  
 –  
 (799) 
 –  
 (799)

  
    
    
    
    
    
    
   

BALANCE - MARCH 31, 2024 
 2,629,725  
$2,629  
$160,337,371  
$(154,566,728) 
$(6,940) 
$–  
$5,766,332 

 
See accompanying notes to the consolidated financial
statements.
 
 
 


 F-5 
 

 

AETHLON MEDICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2024 AND 2023




  
   
  

  
Years Ended March 31, 

  
2024  
2023 

Cash flows from operating activities: 
    
   

Net loss 
$(12,208,174) 
$(12,029,786)

Adjustments to reconcile net loss to net cash used in operating activities: 
    
   

Depreciation and amortization 
 359,057  
 240,892 

Stock-based compensation 
 1,219,370  
 1,051,898 

Loss on disposal of property, plant and equipment 
 21,135  
 – 

Loss on dissolution of Subsidiary 
 –  
 142,121 

Non-cash lease expense 
 143  
 24,408 

  
    
   

Changes in operating assets and liabilities: 
    
   

Accounts receivable 
 –  
 127,965 

Prepaid expenses and other current assets 
 (10,232)  
 398,169 

Accounts payable and other current liabilities 
 156,678  
 (174,727)

Deferred revenue 
 –  
 (344,547)

Due to related parties 
 332,213  
 58,479 

Net cash used in operating activities 
 (10,129,810) 
 (10,505,128)

  
    
   

Cash flows from investing activities: 
    
   

Purchases of property and equipment 
 (250,867) 
 (943,109)

Net cash used in investing activities 
 (250,867) 
 (943,109)

  
    
   

Cash flows from financing activities: 
    
   

Tax withholding payments or tax equivalent payments for net share settlement of restricted stock units 
 (34,778) 
 (12,493)

Net proceeds from the issuance of common stock 
 1,322,383  
 8,927,211 

Net cash provided by financing activities 
 1,287,605  
 8,914,718 

  
    
   

Effect of Exchange Rate on Changes on Cash 
 2,107  
 (5,957)

  
    
   

Net decrease in cash and restricted cash 
 (9,090,965) 
 (2,539,476)

  
    
   

Cash and restricted cash at beginning of year 
 14,620,449  
 17,159,925 

  
    
   

Cash and restricted cash at end of year 
$5,529,484  
$14,620,449 

  
    
   

Supplemental information of non-cash investing and financing activities: 
    
   

Initial recognition of right-of-use lease asset and lease liability 
$–  
$625,471 

Issuance of shares under vested restricted stock units, net stock option exercises and unvested share issuance for services 
$35  
$92 

Reversal of accrued commission liability (see Note
    6) 
$404,120  
$– 

Deferred offering costs not yet paid 
$219,117  
$– 

  
    
   

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: 
    
   

Cash and cash equivalents 
$5,441,978  
$14,532,943 

Restricted cash 
 87,506  
 87,506 

Cash and restricted cash 
$5,529,484  
$14,620,449 

  
See accompanying notes to the consolidated financial
statements.
 
 
 


 F-6 
 

 

Aethlon Medical, Inc. and Subsidiary
Notes to Consolidated Financial Statements
 
 
1. ORGANIZATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
ORGANIZATION
 
Aethlon Medical, Inc., or Aethlon, the Company, we
or us, is a medical therapeutic company focused on developing the Hemopurifier, a clinical-stage immunotherapeutic device designed to
combat cancer and life-threatening viral infections and for use in organ transplantation. In human studies, 164 sessions with 38 patients,
the Hemopurifier was safely utilized and demonstrated the potential to remove life-threatening viruses. In pre-clinical studies, the Hemopurifier
has demonstrated the potential to remove harmful exosomes and exosomal particles from biological fluids, utilizing its proprietary lectin-based
technology. This action has potential applications in cancer, where exosomes and exosomal particles may promote immune suppression and
metastasis, and in life-threatening infectious diseases. The U.S. Food and Drug Administration, or FDA, has designated the Hemopurifier
as a “Breakthrough Device” for two independent indications:
 

·the treatment of individuals with advanced or metastatic cancer
who are either unresponsive to or intolerant of standard of care therapy, and with cancer types in which exosomes have been shown to
participate in the development or severity of the disease; and

 

·the treatment of life-threatening viruses that are not addressed
with approved therapies.

 
Oncology
 
We believe the Hemopurifier may be a substantial advancement
in the treatment of patients with advanced and metastatic cancer through its design to bind to and remove harmful exosomes and exosomal
particles that promote the growth and spread of tumors. In October 2022, we formed a wholly-owned subsidiary in Australia to initially
conduct oncology-related clinical research, then seek regulatory approval and commercialize our Hemopurifier in Australia. We are currently
working with our contract research organization, or CRO, on preparations to conduct a clinical trial in Australia in patients with solid
tumors, including head and neck cancer, and gastrointestinal cancers.
 
In January 2023, we entered into an agreement with
North American Science Associates, LLC, or NAMSA, a world leading medical technology CRO offering global end-to-end development services,
to oversee our planned clinical trials investigating the Hemopurifier for oncology indications. Pursuant to the agreement, NAMSA agreed
to manage our planned clinical trials of the Hemopurifier for patients in the United States and Australia with various types of cancer
tumors.
 
We recently completed an in vitro binding study of relevant oncology
targets, to provide pre-clinical evidence to support our trial design and translational endpoints. Our study indicated positive results
from this study, providing evidence that our Hemopurifier removes extracellular vesicles, or EVs, from plasma. This translational study
provides pre-clinical evidence to support our planned phase 1 safety, feasibility and dose-finding clinical trials of our Hemopurifier
in patients with solid tumors who have stable or progressive disease during anti-PD-1 monotherapy treatment, such as Keytruda® or
Opdivo®. In addition to an interested initial trial site in India, we had three interested sites in Australia that were awaiting our
completion of this in vitro binding study. We added the data from this study to our Clinical Investigator Brochure and submitted
that brochure to the Ethics Committee of Royal Adelaide Hospital in Australia and in June 2024, we received approval for our proposed
phase 1 oncology trial from the Ethics Committee from Royal Adelaide Hospital. We are currently in the process of applying to the Ethics
Committees of the two additional interested clinical trial sites in Australia and the site in India.
 
 
 


 F-7 
 

 
Life-Threatening Viral Infections
 
We also believe that the Hemopurifier can be part
of the broad-spectrum treatment of life-threatening highly glycosylated, or carbohydrate coated, viruses that are not addressed with an
already approved treatment. In small-scale or early feasibility human studies, the Hemopurifier has been used in the past to treat individuals
infected with human immunodeficiency virus, or HIV, hepatitis-C and Ebola.
 
Additionally, in vitro, the Hemopurifier has been
demonstrated to capture Zika virus, Lassa virus, MERS-CoV, cytomegalovirus, Epstein-Barr virus, Herpes simplex virus, Chikungunya virus,
Dengue virus, West Nile virus, smallpox-related viruses, H1N1 swine flu virus, H5N1 bird flu virus, Monkeypox virus and the reconstructed
Spanish flu virus of 1918. In several cases, these studies were conducted in collaboration with leading government or non-government research
institutes.
 
We believe the Hemopurifier can be part of the treatment of severe SARS-CoV-2
viremia/COVID-19, or COVID-19, cases. COVID viremia is detected in approximately 34% of patients and is associated with severity, requirement
for intensive care unit, or ICU, stay, development of multi-organ failure and poor outcomes. EVs and exosomal miRNAs may play a role in
the spread of infection as well as ongoing inflammation, development of coagulopathy and lung injury. Our proprietary Galanthus nivalis
agglutinin, or GNA, affinity resin has been shown to bind multiple clinically relevant SARS-CoV-2 variants. Furthermore, studies have
demonstrated in vitro removal of seven SARS-CoV2 variants (104 PFU/mL) in phosphate buffered saline passed over a column of GNA
affinity resin (1g) three times, with capture efficiencies between 53% and 89%.
 
On June 17, 2020, the FDA approved a supplement to
our open Investigational Device Exemption, or IDE, for the Hemopurifier in viral disease to allow for the testing of the Hemopurifier
in patients with SARS-CoV-2/COVID-19, or COVID-19, in a new feasibility study. That study was designed to enroll up to 40 subjects at
up to 20 centers in the United States. Subjects were to have established laboratory diagnosis of COVID-19, be admitted to an intensive
care unit, or ICU, and have acute lung injury and/or severe or life-threatening disease, among other criteria. Endpoints for this study,
in addition to safety, included reduction in circulating virus as well as clinical outcomes (NCT # 04595903). In January 2021, the Hemopurifier
was used to treat a viremic patient, under our emergency use approval, with a predicted risk of mortality of 80% and the Hemopurifier
was able to reduce the patient’s SARS-CoV-2 plasma viral load by 58.4%. In June 2022, the first patient in this study was enrolled
and completed the Hemopurifier treatment phase of the protocol. Due to the lack of COVID-19 patients in the ICUs of our trial sites, we
terminated this study in 2022. However, our IDE for this indication remains open, as we have an active COVID-19 trial in India and wish
to preserve the option of enrolling patients if the situation with COVID-19 changes.
 
Under Single Patient
Emergency Use regulations, Aethlon has treated two patients with COVID-19 with the Hemopurifier, in addition to the COVID-19 patient treated
with our Hemopurifier in our COVID-19 clinical trial discussed above.
 
We previously reported a disruption in our Hemopurifier supply, as our
then existing supply of Hemopurifiers expired on September 30, 2022 and, also as previously disclosed, we are dependent on FDA approval
of qualified suppliers to manufacture our Hemopurifier. We recently completed final testing in order to begin manufacturing Hemopurifiers
at our new manufacturing facility in San Diego, California for use in planned U.S. clinical trials, using GNA from our current supplier.
In April 2024, we received a notice of approval from the FDA for our IDE supplement to add our San Diego manufacturing facility and we
now are able to manufacture Hemopurifiers at this site. We also have sufficient Hemopurifiers on hand for use in our planned Australia
and India oncology trials. Our intended transition to a new supplier for GNA, a component of our Hemopurifier, continues to be delayed
as we work with the FDA for approval of our supplement to our IDE, which is required to make this manufacturing supplier change. We are
working with the FDA to qualify this second supplier of our GNA.
 
We also obtained ethics review board, or ERB, approval from and entered
into a clinical trial agreement with Medanta Medicity Hospital, a multi-specialty hospital in Delhi NCR, India, for a COVID-19 clinical
trial at that location.
 
 
 


 F-8 
 

 
In May 2023, we received ERB approval from the MAMC, for a second site
for our clinical trial in India to treat severe COVID-19. MAMC was established in 1958 and is located in New Delhi, India. MAMC is affiliated
with the University of Delhi and is operated by the Delhi government.
 
We now have two sites in India for this trial with the Medanta Medicity
Hospital and Maulana Azad Medical College, or MAMC. One patient has been treated to date; however, we have been informed by our CRO that
a new COVID-19 subvariant was detected in India recently. Our COVID-19 trial in India remains open in the event that there are COVID-19
admissions to the ICUs at our sites in India. 
 
Organ Transplantation
 
Additionally, based on preclinical data with acellular
kidney perfusates, we believe that the Hemopurifier has potential applications in organ transplantation. We are investigating whether
the Hemopurifier, when incorporated into a machine perfusion organ preservation circuit, can remove harmful viruses, exosomes, RNA molecules,
cytokines, chemokines and other inflammatory molecules from recovered organs. We initially are focused on recovered kidneys from deceased
donors. We have previously demonstrated the removal of multiple viruses and exosomes and exosomal particles from buffer solutions, in
vitro, utilizing a scaled-down version of our Hemopurifier and believe this process could reduce transplantation complications by
improving graft function, reducing graft rejection, maintaining or improving organ viability prior to transplantation, and potentially
reducing the number of kidneys rejected for transplant.
 
Successful outcomes of human trials will also
be required by the regulatory agencies of certain foreign countries where we plan to market and sell the Hemopurifier. Some of our patents
may expire before FDA approval or approval in a foreign country, if any, is obtained. However, we believe that certain patent applications
and/or other patents issued to us more recently will help protect the proprietary nature of our Hemopurifier treatment technology.
 
In addition to the foregoing, we are monitoring closely
the impact of inflation, recent bank failures and the war between Russia and Ukraine and the military conflicts in Israel and the surrounding
areas, as well as related political and economic responses and counter-responses by various global factors on our business. Given the
level of uncertainty regarding the duration and impact of these events on capital markets and the U.S. economy, we are unable to assess
the impact on our timelines and future access to capital. The full extent to which inflation, recent bank failures and the ongoing military
conflicts will impact our business, results of operations, financial condition, clinical trials and preclinical research will depend on
future developments, as well as the economic impact on national and international markets that are highly uncertain. 
 
Our executive offices are located at 11555 Sorrento
Valley Road, Suite 203, San Diego, California 92121. Our telephone number is (619) 941-0360. Our website address is www.aethlonmedical.com.
The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this Annual Report
on Form 10-K.
 .
Our common stock is listed on the Nasdaq Capital Market
under the symbol “AEMD.”
 
LIQUIDITY AND GOING CONCERN
 
The Company has incurred losses since inception in devoting substantially
all of its efforts toward research and development and has an accumulated deficit of $154,566,728 as of March 31, 2024. During the year
ended March 31, 2024, the Company generated a net loss of approximately $12,208,000 and the Company expects that it will continue to generate
operating losses for the foreseeable future. While the Company currently has over $9.1 million in cash and cash equivalents and have been
carrying out certain expense reductions since November 2023; our planned additional expense reductions may not materialize and/or our
patient recruitment may occur more rapidly than expected along with the concomitant increases in expenses, therefore there is substantial
doubt that our cash on hand will carry the company for 12 months beyond the filing date of the financial statements included in this Annual
Report.
 
 
 


 F-9 
 

 
The Company’s ability to execute its current operating plan depends
on its ability to reduce expenses and obtain additional funding via the sale of equity, or other sources of capital. The Company plans
to continue actively pursuing financing alternatives, however, there can be no assurance that it will obtain the necessary funding, raising
substantial doubt about the Company’s ability to continue as a going concern within one year of the date these financial statements
are issued. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
PRINCIPLES OF CONSOLIDATION
 
The accompanying consolidated financial statements
include the accounts of Aethlon Medical, Inc. and its wholly owned subsidiary, Aethlon Medical Australia Pty Ltd, as well as its previously
majority-owned subsidiary, ESI, which dissolved in September 2022. Operations in our Australian subsidiary is recorded in their functional
currency. The results of operations for our Australian subsidiary are translated from functional currency into U.S. dollars using the
current exchange rate on the date the expense was recognized. Assets and liabilities are translated using the period end exchange rates.
The U.S dollar effects that arise from translating the net assets of are recorded in other comprehensive income (loss). All significant
inter-company transactions and balances have been eliminated in consolidation. The consolidated financial statements contain all normal
recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the consolidated financial statements
as of and for the fiscal years ended March 31, 2024 and 2023, and the consolidated statement of cash flows for the fiscal years ended
March 31, 2024 and 2023.
 
RISKS AND UNCERTAINTIES
 
We operate in an industry that is subject to intense
competition, government regulation and rapid technological change. Our operations are subject to significant risk and uncertainties including
financial, operational, technological, regulatory, and including the potential risk of business failure.
 
USE OF ESTIMATES
 
We prepare our consolidated financial statements in
conformity with accounting principles generally accepted in the United States of America, or GAAP, which requires us to make a number
of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements. Such estimates and assumptions affect the reported amounts of expenses during the reporting period.
On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances.
We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates
under different future conditions.
 
We believe that the estimates and assumptions that
are most important to the portrayal of our financial condition and results of operations, in that they require the most difficult, subjective
or complex judgments, form the basis for the accounting policies deemed to be most critical to us.
  
CASH AND CASH EQUIVALENTS
 
Accounting standards define “cash and cash equivalents”
as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their maturity that
they present insignificant risk of changes in value because of changes in interest rates. For the purpose of financial statement presentation,
we consider all highly liquid investment instruments with original maturities of three months or less when purchased, or any investment
redeemable without penalty or loss of interest to be cash equivalents. Cash is carried at cost, which approximates fair value, and cash
equivalents are carried at fair value.
 
 
 


 F-10 
 

 
For the fiscal years ended March 31, 2024 and March
31, 2023 our cash and cash equivalents were comprised of the following instruments: 


Schedule of cash and cash equivalents 
    
   

  
For the year ended 

  
March 31,  2024  
March 31,  2023 

Cash in US bank checking account 
$697,908  
$575,766 

Cash equivalents held in US Treasury bills 
 4,736,469  
 13,910,973 

Cash in Australian bank checking account 
 7,601  
 46,204 

Total cash and cash equivalents 
$5,441,978  
$14,532,943 

  
CONCENTRATIONS OF CREDIT RISKS
 
Cash is maintained at one US financial institution
in a checking account. Accounts at this institution are secured by the Federal Deposit Insurance Corporation up to $250,000. Our March
31, 2024 cash balances were approximately $568,000 over such insured amount. We do not believe that
the Company is exposed to any significant risk with respect to its cash in that checking account.
 
At March 31,
2024, we maintained cash equivalents of approximately $4.7 million in US Treasury bills with maturities of less than three months. We
do not believe that the Company is exposed to any significant risk with respect to its cash equivalents since they represent US government
risk.
 
Cash is maintained at one Australian financial institution
in checking accounts. Accounts at this institution are secured by the Financial Claims Scheme for up to Australian $250,000. Our March
31, 2024 Australian cash balance was below that threshold.
 
We did not have any revenue in fiscal year ended March
31, 2024. All of our revenue in the fiscal year ended March 31, 2023 related to our government contracts. We did not have any accounts
receivable at March 31, 2024.
 
RESTRICTED CASH
 
To comply with the terms of our laboratory, office,
and manufacturing space leases, we caused our bank to issue two standby letters of credit, or the L/Cs, in the amount of $87,506 in favor
of the landlord. The L/Cs are in lieu of a security deposit. In order to support the L/Cs, we agreed to have our bank withdraw $87,506
from our operating accounts and to place that amount in restricted certificates of deposit. We have classified that amount as restricted
cash, a long-term asset, on our balance sheet.
 
PROPERTY AND EQUIPMENT
 
Property and equipment are stated at cost. Depreciation
is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to five years.
Repairs and maintenance are charged to expense as incurred while improvements are capitalized. Upon the sale or retirement of property
and equipment, the accounts are relieved of the cost and the related accumulated depreciation with any gain or loss included in the consolidated
statements of operations.
 
 
 


 F-11 
 

 
INCOME TAXES
 
Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to the difference between the consolidated financial statements and their respective tax basis. Deferred income taxes reflect
the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts reported for income tax purposes, and (b) tax credit carryforwards. We record a valuation allowance for deferred tax assets
when, based on our best estimate of taxable income (if any) in the foreseeable future, it is more likely than not that some portion of
the deferred tax assets may not be realized. Management has provided a full valuation allowance against the Company’s net deferred
tax asset. Tax positions taken or expected to be taken in the course of preparing tax returns are required to be evaluated to determine
whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions deemed to not meet a
more-likely-than-not threshold would be recorded as tax expense in the current year. There were no uncertain tax positions that require
accrual to or disclosure in the consolidated financial statements as of March 31, 2024 and 2023.
 
LONG-LIVED ASSETS
 
Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the cost basis of a long-lived asset
is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized. We believe no impairment
charges were necessary during the fiscal years ended March 31, 2024 and 2023.
  
LOSS PER SHARE
 
Basic loss per share is computed by dividing net loss
available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted
loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional
common shares that would have been outstanding if potential common shares had been issued, if such additional common shares were dilutive.
Since we had net losses for all periods presented, basic and diluted loss per share are the same, and additional potential common shares
have been excluded as their effect would be antidilutive.
  
As of March 31, 2024 and 2023, a total of 124,028
and 204,501 potential common shares, consisting of shares underlying outstanding stock options, restricted stock units, or RSUs, and warrants
were excluded as their inclusion would be antidilutive.
 
DEFERRED OFFERING COSTS
 
Specific incremental costs directly attributable to
an actual offering of securities may be deferred and charged against the gross proceeds of the offering. As of March 31, 2024, approximately
$278,000 of costs have been deferred.
 
REVENUE RECOGNITION
 
We did not recognize revenue in fiscal year ended
March 31, 2024. Our revenues in the fiscal year ended March 31, 2023 consisted entirely of amounts earned under contracts and grants with
the National Institutes of Health, or NIH. During the fiscal year ended March 31, 2023, we recognized revenues totaling $574,245 under
such contracts. We have concluded that these agreements are not within the scope of ASC Topic, 606, Revenue from Contracts with Customers,
or Topic 606, as the NIH grants and contracts do not meet the definition of a “customer” as defined by Topic 606. Prior to
the effective date of ASC Topic 606, which for the Company was April 1, 2018, we accounted for our grant/contract revenues under the Milestone
Method as prescribed by the legacy guidance of ASC 605-28, Revenue Recognition – Milestone Method, or Milestone Method. In the absence
of other applicable guidance under US GAAP, effective April 1, 2018, we elected to continue to use the Milestone Method by analogy to
recognize revenue under these grants/contracts.
 
 
 


 F-12 
 

 
We identify the deliverables included within these
agreements and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether
the delivered element has standalone value to the collaborator. The consideration received is allocated among the separate units of accounting,
and the applicable revenue recognition criteria are applied to each of the separate units.
 
A milestone is an event having all of the following
characteristics:
 
(1) There is substantive uncertainty at the date the
arrangement is entered into that the event will be achieved. A vendor’s assessment that it expects to achieve a milestone does not
necessarily mean that there is not substantive uncertainty associated with achieving the milestone.
 
(2) The event can only be achieved based in whole
or in part on either: (a) the vendor’s performance; or (b) a specific outcome resulting from the vendor’s performance.
 
(3) If achieved, the event would result in additional
payments being due to the vendor.
 
A milestone does not include events for which the
occurrence is either: (a) contingent solely upon the passage of time; or (b) the result of a counterparty’s performance.
  
The policy for recognizing deliverable consideration
contingent upon achievement of a milestone must be applied consistently to similar deliverables.
  
The assessment of whether a milestone is substantive
is performed at the inception of the arrangement. The consideration earned from the achievement of a milestone must meet all of the following
for the milestone to be considered substantive:
 
(1) The consideration is commensurate with either:
(a) the vendor’s performance to achieve the milestone; or (b) the enhancement of the value of the delivered item or items as a result
of a specific outcome resulting from the vendor’s performance to achieve the milestone;
 
(2) The consideration relates solely to past performance;
and
 
(3) The consideration is reasonable relative to all
of the deliverables and payment terms (including other potential milestone consideration) within the arrangement.
 
A milestone is not considered substantive if any portion
of the associated milestone consideration relates to the remaining deliverables in the unit of accounting (i.e., it does not relate solely
to past performance). To recognize the milestone consideration in its entirety as revenue in the period in which the milestone is achieved,
the milestone must be substantive in its entirety. Milestone consideration cannot be bifurcated into substantive and nonsubstantive components.
In addition, if a portion of the consideration earned from achieving a milestone may be refunded or adjusted based on future performance,
the related milestone is not considered substantive.
 
We have recognized revenue under the following contract/grant:
 
Phase 2 Melanoma Cancer Contract
 
On September 12, 2019, the National Cancer Institute,
or NCI, part of the NIH, awarded to us a SBIR Phase II Award Contract, for NIH/NCI Topic 359, entitled “A Device Prototype for Isolation
of Melanoma Exosomes for Diagnostics and Treatment Monitoring”, or the Award Contract. The Award Contract amount was $1,860,561
and, as amended, ran for the period from September 16, 2019 through September 15, 2022.
 
 
 


 F-13 
 

 
The work performed pursuant to this Award Contract
was focused on melanoma exosomes. This work followed from our completion of a Phase I contract for the Topic 359 solicitation that ran
from September 2017 through June 2018, as described below. Following on the Phase I work, the deliverables in the Phase II program involved
the design and testing of a pre-commercial prototype of a more advanced version of the exosome isolation platform.
 
The Award Contract ended on September 15, 2022 and
we presented the required final report to the NCI. As the NCI completed its close out review of the contract, we recognized as revenue
$574,245 in fiscal year ended March 31, 2023.
  
STOCK-BASED COMPENSATION
 
Employee stock options and rights to purchase shares
under stock participation plans are accounted for under the fair value method. Accordingly, share-based compensation is measured when
all granting activities have been completed, generally the grant date, based on the fair value of the award. The exercise price of options
is generally equal to the market price of the Company’s common stock (defined as the closing price as quoted on the Nasdaq Capital
Market or OTCBB on the date of grant). Compensation cost recognized by the Company includes (a) compensation cost for all equity incentive
awards granted prior to April 1, 2006, but not yet vested, based on the grant-date fair value estimated in accordance with the original
provisions of the then current accounting standards, and (b) compensation cost for all equity incentive awards granted subsequent to March
31, 2006, based on the grant-date fair value estimated in accordance with the provisions of subsequent accounting standards. We use a
Binomial Lattice option pricing model for estimating fair value of options granted (see Note 4).
 
The following table summarizes share-based compensation
expenses relating to shares and options granted and the effect on loss per common share during the years ended March 31, 2024 and 2023:


Schedule of share-based compensation expenses 
   
  

  
Fiscal Years Ended 

  
March 31, 2024  
March 31, 2023 

Vesting of Stock Options and Restricted Stock Units 
$1,219,370  
$1,051,898 

Total Stock-Based Compensation Expense 
$1,219,370  
$1,051,898 

  
    
   

Weighted average number of common shares outstanding – basic and diluted 
 2,512,774  
 2,053,744 

  
    
   

Basic and diluted loss per common share 
$(0.49) 
$(0.51)

 
We record share-based compensation expenses for awards
of stock options and RSUs under ASC 718, Share-based compensation, or ASC 718. For awards to non-employees for periods prior to the adoption
of ASU 2018-07, Compensation-Stock Compensation: Improvements to Non-employee Share-Based Payment Accounting, on April 1, 2019, the Company
had applied ASC 505-50, Equity – Equity-based payments to non-employees, or ASC 505-50. ASC 718 establishes guidance for the recognition
of expenses arising from the issuance of share-based compensation awards at their fair value at the grant date.
 
We recognize share-based compensation expense related
to stock options and stock appreciation rights granted to employees, directors and consultants based on the estimated fair value of the
awards on the date of grant. We estimate the grant date fair value, and the resulting share-based compensation expense, for stock options
that only have service vesting requirements or performance-based vesting requirements without market conditions using the binomial lattice
option-pricing model. The grant date fair value of the share-based awards with service vesting requirements is generally recognized on
a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. Determining the
appropriate amount to expense for performance-based awards based on the achievement of stated goals requires judgment. The estimate of
expense is revised periodically based on the probability of achieving the required performance targets and adjustments are made as appropriate.
The cumulative impact of any revisions is reflected in the period of change. If any applicable financial performance goals are not met,
no compensation cost is recognized and any previously recognized compensation cost is reversed. For performance-based awards with market
conditions, we determine the fair value of awards as of the grant date using a Monte Carlo simulation model.
 
 
 


 F-14 
 

 
We review share-based compensation on a quarterly
basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture
rate for all expense amortization after March 31, 2007 is recognized in the period the forfeiture estimate is changed. The effect of forfeiture
adjustments for the fiscal year ended March 31, 2024 was insignificant.
 
PATENTS
 
Patents include both foreign and domestic patents.
We capitalize the cost of patents, some of which were acquired, and amortize such costs over the shorter of the remaining legal life or
their estimated economic life, upon issuance of the patent. The unamortized costs of patents are subject to our review for impairment
under our long-lived asset policy above.
 
STOCK PURCHASE WARRANTS
 
In the past we issued warrants for the purchase of
shares of our common stock in connection with the issuance of common stock for cash. Warrants issued in connection with common stock for
cash, if classified as equity, are considered issued in connection with equity transactions and the warrant fair value is recorded to
additional paid-in-capital.
 
RESEARCH AND DEVELOPMENT EXPENSES
 
Our research and development costs are expensed as
incurred. We incurred approximately $2,520,000 and $2,745,000 of research and development expenses for the years ended March 31, 2024
and 2023, respectively, which are included in various operating expenses in the accompanying consolidated statements of operations.
 
OFF-BALANCE SHEET ARRANGEMENTS
 
We have not entered into any off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our consolidated financial statements.
 
SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS
 
In December 2023, the FASB issued Accounting Standards
Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires enhanced annual disclosures for specific
categories in the rate reconciliation and income taxes paid disaggregated by federal, state and foreign taxes. ASU 2023-09 is effective
for public business entities for annual periods beginning after December 15, 2024. The Company is evaluating if the adoption of this new
standard will have a material effect on our disclosures.
 
In June 2016, the FASB issued ASU No. 2016-13, Financial
Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The adoption of ASU No. 2016-13 for smaller
reporting companies that did not previously early adopt was January 1, 2023. The Company maintained
US Treasury bills with maturities of less than three months and expects zero credit losses from these securities. As a result,
the Company did not record an allowance for expected credit losses.
 
 
 


 F-15 
 

 
2. PROPERTY AND EQUIPMENT, NET
 
Property and equipment, net, consist of the following:


Schedule of property and equipment, net 
   
  

  
March 31, 2024  
March 31, 2023 

Furniture and office equipment, at cost 
$1,112,648  
$989,987 

Leasehold improvements 
 893,131  
 888,224 

Accumulated depreciation 
 (990,550) 
 (734,207)

Fixed Assets, net 
$1,015,229  
$1,144,004 

  
Depreciation expense for the fiscal years ended March 31, 2024 and 2023
was $358,507 and $240,342, respectively.
 
3. PATENTS, NET
 
Patents, net consist of the following:


Schedule of patents, net 
   
  

  
March 31, 2024  
March 31, 2023 

Issued patents 
$157,442  
$157,442 

Accumulated amortization 
 (156,342) 
 (155,792)

Issued patents, net of accumulated amortization 
 1,100  
 1,650 

Patents, net 
$1,100  
$1,650 

 
Amortization expense for our capitalized issued patents
for each of the fiscal years ended March 31, 2024 and 2023 was $550. As only one capitalized patent remains to be amortized, future amortization
expense on patents is estimated to be approximately $550 per year based on the estimated life of the patent. The weighted average remaining
life of our remaining capitalized patent is approximately 2.0 years.
  
4. EQUITY TRANSACTIONS
 
REVERSE
STOCK SPLIT
 
On
October 4, 2023, we effected a 1-for-10 reverse stock split of our then outstanding shares of common stock. Accordingly, each
10 shares of outstanding common stock then held by our stockholders were combined into one share of common stock. Any fractional shares
resulting from the reverse split were rounded up to the next whole share. Authorized common stock remained at 60,000,000 shares
following the stock split. The accompanying consolidated financial statements and accompanying notes have been retroactively revised to
reflect such reverse stock split as if it had occurred on April 1, 2022. All shares and per share amounts have been revised accordingly.
 
ISSUANCES OF COMMON STOCK AND WARRANTS
 
Equity Transactions in the Fiscal Year Ended March 31, 2024.

 
2022 At The Market Offering Agreement with H.C. Wainwright & Co.,
LLC
 
On March 24, 2022, we entered into an At The Market
Offering Agreement, or the 2022 ATM Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, which established an at-the-market
equity program pursuant to which we may offer and sell shares of our common stock from time to time as set forth in the 2022 ATM Agreement.
 
 
 


 F-16 
 

 
The offering was registered under the Securities Act
of 1933, as amended, or the Securities Act, pursuant to our shelf registration statement on Form S-3 (Registration Statement No. 333-259909),
as previously filed with the Securities and Exchange Commission, or SEC, and declared effective on October 21, 2021. We filed a prospectus
supplement, dated March 24, 2022, with the SEC that provides for the sale of shares of our common stock, or the 2022 ATM Shares, having
an aggregate offering price of up to $15,000,000, which was subsequently and most recently updated pursuant to our prospectus supplement,
dated September 29, 2022, filed with the SEC that provides for the sale of 2022 ATM Shares having an aggregate offering price of up to
$6,625,000. As of March 31, 2024, $5,302,617 of 2022 ATM Shares remained available for sale under the 2022 ATM Agreement.
 
Under the 2022 ATM Agreement, Wainwright may sell
the 2022 ATM Shares by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415 promulgated
under the Securities Act, including sales made directly on the Nasdaq Capital Market, or on any other existing trading market for the
2022 ATM Shares. In addition, under the 2022 ATM Agreement, Wainwright may sell the 2022 ATM Shares in privately negotiated transactions
with our consent and in block transactions. Under certain circumstances, we may instruct Wainwright not to sell the 2022 ATM Shares if
the sales cannot be effected at or above the price designated by us from time to time.
 
We are not obligated to make any further sales of
the 2022 ATM Shares under the 2022 ATM Agreement. The offering of the 2022 ATM Shares pursuant to the 2022 ATM Agreement will terminate
upon the termination of the 2022 ATM Agreement by Wainwright or us, as permitted therein.
 
The 2022 ATM Agreement contains customary representations,
warranties and agreements by us, and customary indemnification and contribution rights and obligations of the parties. We agreed to pay
Wainwright a placement fee of up to 3.0% of the aggregate gross proceeds from each sale of the 2022 ATM Shares. We also agreed to reimburse
Wainwright for certain specified expenses in connection with entering into the 2022 ATM Agreement.
 
In the fiscal year ended March 31, 2024, we raised
aggregate net proceeds of $1,322,383 net of $34,118 in commissions to Wainwright and $8,202 in other offering expense, through the sale
of 296,056 shares of our common stock at an average price of $4.47 per share under the 2022 ATM Agreement.
 
RSU Grants to Non-Employee Directors 
 
In
April 2023, the Compensation Committee of the Board, or Compensation Committee, approved, pursuant to the terms of the Company’s
Amended and Restated Non-Employee Director Compensation Policy, or the Director Compensation Policy, the grant of the annual RSUs under
the Director Compensation Policy to each of the three non-employee directors of the Company then serving on the Board of Directors of
the Company, or Board. The Director Compensation Policy provides for a grant of stock options or $50,000 worth of RSUs at the beginning
of each fiscal year for current non-employee directors then serving on the Board, and for a grant of stock options or $75,000 worth of
RSUs for a newly elected non-employee director, with each RSU priced at the average for the closing prices for the five days preceding
and including the date of grant, or $4.30 per share for the April 2023 RSU grants. As a result, in April 2023 the three eligible directors
were each granted an RSU in the amount of 11,628 shares under the 2020 Plan. The RSUs are subject to vesting in four equal installments,
with 25% of the restricted stock units vesting on each of June 30, 2023, September 30, 2023, December 31, 2023, and March 31, 2024, subject
in each case to the director’s Continuous Service (as defined in the 2020 Plan), through such dates. Vesting will terminate upon
the director’s termination of Continuous Service prior to any vesting date. 
 
Unvested RSUs covering 4,885
shares of common stock were outstanding as of March 31, 2024.
 

Equity Transactions in the Fiscal Year Ended March 31, 2023.
 
During the fiscal year ended March 31, 2023, we raised
net proceeds of $8,927,211, net of $229,610 in commissions to Wainwright and $27,153 in other offering expense, through the sale of 748,084
shares of our common stock at an average price of $11.90 per share under the 2022 ATM Agreement.
 
 
 


 F-17 
 

 
RSU Grants to Non-Employee Directors
 
The Compensation
Committee approved, effective as of April 1, 2022, pursuant to the terms of the Director Compensation Policy, the grant of the
annual RSUs to each of the two non-employee directors of the Company then serving on the Board, and the grant of an RSU for the then
newly appointed non-employee director. The RSU grants were made subject to stockholder approval of an increase of 1,800,000
shares of common stock authorized for issuance under the Company’s 2020 Equity Incentive Plan, or the 2020 Plan, at the
Company’s 2022 Annual Meeting of Stockholders. The increase was approved at the Company’s 2022 Annual Meeting of
Stockholders held in September 2022. The Director Compensation Policy provides for a grant of stock options or $50,000 worth of RSUs
at the beginning of each fiscal year for current non-employee directors then serving on the Board and for a grant of stock options
or $75,000 worth of RSUs for a newly elected non-employee director, with each RSU priced at the average for the closing prices for
the five days preceding and including the date of grant, or $14.60 per share as of April 1, 2022. The two then-current eligible
directors each was granted a contingent RSU in the amount of 3,425 shares
under the 2020 Plan and the then newly appointed director received a contingent RSU grant for 5,137 shares
under the 2020 Plan. The
RSUs were subject to vesting in three installments, 50% on September 30, 2022, and 25% on each of December 31, 2022, and March 31,
2023, subject to the recipient's continued service with the Company on each such vesting date. 
 
There were no vested RSUs outstanding as of
March 31, 2023.
 
WARRANTS:
 
We did not issue any warrants during the fiscal years
ended March 31, 2024 and 2023. 
 
A summary of the aggregate warrant activity for the years ended March 31,
2024 and 2023 is presented below:


Schedule of warrant activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Fiscal Year Ended March 31,
 

 
 
2024
 
 
2023
 

 
 
Warrants
 
 
Weighted 
Average
Exercise Price
 
 
Warrants
 
 
Weighted 
Average
Exercise Price
 

Outstanding, beginning of year
 
 
32,676
 
 
$
20.09
 
 
 
57,678
 
 
$
112.11
 

Granted
 
 
–
 
 
$
N/A
 
 
 
–
 
 
$
N/A
 

Exercised
 
 
–
 
 
$
N/A
 
 
 
–
 
 
$
N/A
 

Cancelled/Forfeited
 
 
–
 
 
$
N/A 
 
 
 
(25,002
)
 
$
232.38
 

Outstanding, end of year
 
 
32,676
 
 
$
20.09
 
 
 
32,676
 
 
$
20.09
 

Exercisable, end of year
 
 
32,676
 
 
$
20.09
 
 
 
32,676
 
 
$
20.09
 

Weighted average estimated fair value of warrants granted
 
 
 
 
 
$
N/A
 
 
 
 
 
 
$
N/A
 

 
 
 


 F-18 
 

 
The detail of the warrants outstanding and exercisable as of March 31,
2024 is as follows:


Schedule of warrant activity exercisable and outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
Warrants Outstanding
 
 
 
Warrants Exercisable
 

Range of 
Exercise Prices
 
 
Number 
Outstanding
 
 
 
Weighted
Average 
Remaining 
Life (Years)
 
 
 
Weighted 
Average 
Exercise Price
 
 
 
Number 
Outstanding
 
 
 
Weighted 
Average 
Exercise Price
 

$18.75 or Below
 
 
20,217
 
 
 
.71
 
 
$
15.66
 
 
 
20,217
 
 
$
15.66
 

$25.00 - $27.50
 
 
12,459
 
 
 
.81
 
 
$
27.28
 
 
 
12,459
 
 
$
27.28
 

 
 
 
32,676
 
 
 
 
 
 
 
 
 
 
 
32,676
 
 
 
 
 

 
The detail of the warrants outstanding and exercisable as of March 31,
2023 is as follows:



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
Warrants Outstanding
 
 
 
Warrants Exercisable
 

Range of 
Exercise Prices
 
 
Number 
Outstanding
 
 
 
Weighted
Average 
Remaining 
Life (Years)
 
 
 
Weighted 
Average 
Exercise Price
 
 
 
Number 
Outstanding
 
 
 
Weighted 
Average 
Exercise Price
 

$18.75 or Below
 
 
20,217
 
 
 
1.71
 
 
$
15.66
 
 
 
20,217
 
 
$
15.66
 

$25.00 - $27.50
 
 
12,459
 
 
 
1.81
 
 
$
27.28
 
 
 
12,459
 
 
$
27.28
 

 
 
 
32,676
 
 
 
 
 
 
 
 
 
 
 
32,676
 
 
 
 
 

 
STOCK-BASED COMPENSATION:
 
2020 EQUITY INCENTIVE PLAN
 
In September 2020, our stockholders approved the adoption
of the 2020 Plan, to provide incentives to attract, retain and motivate employees, directors and consultants, whose present and potential
contributions are important to our success, by offering them an opportunity to participate in our future performance through awards of
options, the right to purchase common stock, stock bonuses and stock appreciation rights and other awards. We initially authorized a total
of 168,182 common shares for issuance under the 2020 Plan pursuant to stock option grants, RSUs or other forms of stock-based compensation.
 
In September 2022, our stockholders approved an increase
in the number of shares of common stock authorized for issuance under the 2020 Plan by 180,000 shares. As of March 31, 2024, there were
200,948 shares available under the 2020 Plan.
 
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
 
The Company maintains the Director Compensation Policy
which provides for cash and equity compensation for persons serving as non-employee directors of the Company. Under this policy, each
new non-employee director receives either stock options or a grant of RSUs upon appointment/election, as well as either an annual grant
of stock options or of RSUs at the beginning of each fiscal year. The (i) stock options are subject to vesting and (ii) RSUs are subject
to vesting and represent the right to be issued on a future date shares of our common stock upon vesting.
 
 
 


 F-19 
 

 
Please see above under the heading "Equity Transactions
in the Fiscal Year Ended March 31, 2024—RSU Grants to Non-Employee Directors" for disclosure regarding equity awards under
the Director Compensation Policy during the fiscal year ended March 31, 2024.
 
STOCK OPTION ACTIVITY
 
During the fiscal year ended March 31, 2024, we
did not issue stock option grants. The assumptions used in estimating the fair value of stock options in the fiscal year ended
March 31, 2023 included volatility ranging from 136.1%
to 140%,
a 0%
dividend rate, and risk-free rates between 1.49%
and 2.14%.
The weighted average expected volatility was 138.07%
 
Options outstanding that were vested as of March 31,
2024 and options that are expected to vest subsequent to March 31, 2024 are as follows:


Schedule of options outstanding that have vested and are expected to
    vest
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Number of
Shares
 
 
Weighted
Average
Exercise
Price
 
 
Weighted
Average
Remaining
Contractual
Term in
Years
 

Vested
 
 
57,813
 
 
$
19.41
 
 
 
6.96
 

Expected to vest
 
 
28,653
 
 
$
15.01
 
 
 
7.78
 

Total
 
 
86,466
 
 
 
 
 
 
 
 
 

 
The following is a summary of the stock options outstanding
at March 31, 2024 and 2023 and the changes during the years then ended:


Schedule of stock option activity 
   
   
   
  

  
Fiscal Year Ended March 31, 

  
2024  
2023 

  
Options  
Weighted  Average  Exercise Price  
Options  
Weighted Average  Exercise Price 

Outstanding, beginning of year 
 171,825  
$22.4  
 166,595  
$23.1 

Granted 
 –  
$–  
 12,222  
$9.50 

Cancelled/Forfeited 
 (85,359) 
$26.89  
 (6,992) 
$17.70 

Outstanding, end of year 
 86,466  
$17.95  
 171,825  
$22.4 

Exercisable, end of year 
 57,813  
$19.41  
 75,554  
$24.5 

Weighted average estimated fair value of options granted 
    
$N/A  
    
$N/A 

 

There were no stock option grants during the fiscal year ended March 31,
2024. There were 12,222 stock options granted during the fiscal year ended March 31, 2023. The weighted average grant date fair value
of stock options granted during the fiscal year ended March 31, 2023 was $61,146. There were 54,428 RSUs granted during the fiscal year ended
March 31, 2024. The weighted average grant date fair value of RSUs granted during the fiscal year ended March 31, 2024 was $58,333. There
were no stock option exercises during the fiscal years ended March 31, 2024 and 2023.
 
 
 


 F-20 
 

 
The table below summarizes nonvested stock options  as of March
31, 2024 and changes during the year ended March 31, 2024. 



Schedule of  nonvested shares 
    
   

  
Shares  
Weighted Average Grant Date Fair Value 

Nonvested stock options  at April 1, 2023 
 96,273  
$19.99 

Vested 
 (21,934) 
$1.59 

Forfeited 
 (45,686) 
$2.55 

Nonvested stock options at March 31, 2024 
 28,653  
  

 

The detail of the options outstanding and exercisable as of March 31, 2024
is as follows:


 
Schedule of detail of options outstanding and exercisable by exercise
    price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Options Outstanding
 
 
 
Options Exercisable
 

 
Exercise Prices
 
 
 
Number 
Outstanding
 
 
 
Weighted 
Average 
Remaining 
Life (Years)
 
 
 
Weighted 
Average 
Exercise 
Price
 
 
 
Number 
Outstanding
 
 
 
Weighted 
Average 
Exercise 
Price
 

 
$6.90 - $16.80
 
 
 
62,204
 
 
 
7.48 years
 
 
$
13.24
 
 
 
38,589
 
 
$
13.48
 

 
$25.20
 
 
 
24,178
 
 
 
6.76 years
 
 
$
25.20
 
 
 
19,140
 
 
$
25.20
 

 
$1,425.00
 
 
 
84
 
 
 
.18 years
 
 
$
1,425.00
 
 
 
84
 
 
$
1,425.00
 

 
 
 
 
 
86,466
 
 
 
 
 
 
 
 
 
 
 
57,813
 
 
 
 
 

 
We recorded stock-based compensation expense related
to RSU issuances and to options granted totaling $1,219,370 and $1,051,898 for the fiscal years ended March 31, 2024 and 2023, respectively.
These expenses were recorded as stock compensation included in payroll and related expenses in the accompanying consolidated statement
of operations for the years ended March 31, 2024 and 2023.
 
The table below summarizes restricted stock units
as of March 31, 2024 and changes during the year ended March 31, 2024.


Schedule of RSUs 
  

  
Shares 

Nonvested RSUs at April 1, 2023 
 – 

Granted 
 54,428 

Vested 
 (34,378)

  
   

Tax withholding payments or tax equivalent payments for net share settlement of restricted stock units 
 (15,165)

Nonvested RSUs at March 31, 2024 
 4,885 

 
Our total stock-based compensation for fiscal years
ended March 31, 2024 and 2023 included the following:


Schedule of stock-based compensation 
   
  

  
Fiscal Year Ended 

  
March 31, 2024  
March 31, 2023 

Vesting of restricted stock units 
$206,250  
$175,000 

Vesting of stock options 
 1,013,120  
 876,898 

Total Stock-Based Compensation 
$1,219,370  
$1,051,898 

 
We review share-based compensation on a quarterly
basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The cumulative effect of adjusting
the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture
adjustments for the fiscal year ended March 31, 2024 was insignificant.
 
On March 31, 2024, our outstanding stock options had
no intrinsic value since the closing price on that date of $1.68 per share was below the weighted average exercise price of our outstanding
stock options.
 
At March 31, 2024, there was approximately $400,002
of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of
1.57 years.
 
 
 


 F-21 
 

 
 
5. RELATED PARTY TRANSACTIONS
 
DUE TO RELATED PARTIES
 
For the fiscal year ended
March 31, 2024 we accrued unpaid fees of $68,250 owed to our non-employee directors.
 
As a result of entering
into a Separation Agreement effective November 27, 2023 with our former Chief Executive Officer, or CEO, Charles J. Fisher, M.D., or
the Separation Agreement, we paid out accrued vacation of $53,076
to Dr. Fisher in the fiscal year ended March 31, 2024. That accrued vacation was previously recorded in the due to related parties
account. In addition, pursuant to the terms of Dr. Fisher’s Executive Employment Agreement, we accrued $435,378 for
cash severance payments payable monthly and COBRA payments to be paid monthly over a 12-month period that began on December 1,
2023.
 
Additionally, $393,139
of stock-based compensation was recorded during the fiscal year ended March 31, 2024 for the acceleration of vesting for 50% of then outstanding
options held by Dr. Fisher at the time of his separation from the Company.
 
Amounts
due to related parties were comprised of the following items:


Schedule of amounts
due to related parties 
   
  

  
March 31,   2024  
March 31,  2023 

Accrued Board fees 
$68,250  
$57,000 

Accrued vacation to all employees 
 167,973  
 157,221 

Accrued separation expenses for former executive 
 310,211  
 – 

Total due to related parties 
$546,434  
$214,221 

 
6. OTHER CURRENT LIABILITIES
 
Other current liabilities were comprised of the following items:


Schedule of other current liabilities 
   
  

  
March 31, 2024  
March 31, 2023 

Accrued professional fees 
$215,038  
$184,472 

Accrued commission liability 
 –  
 404,120 

Total other current liabilities 
$215,038  
$588,592 

 
During 2017 through 2020, the Company incorrectly
recorded accrued commission liability of approximately $404,000. The Company reversed accrued commission liability of approximately $404,000
during the year ended March 31, 2024.
 
7. INCOME TAXES
 
For the years ended March 31, 2024 and 2023, we had
no income tax expense due to our net operating losses and 100% deferred tax asset valuation allowance.
 
At March 31, 2024 and 2023, we had net deferred tax
assets as detailed below. These deferred tax assets are primarily composed of capitalized research and development costs and tax net operating
loss carryforwards. Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a 100% valuation
allowance has been established to offset the net deferred tax assets.
 
 
 


 F-22 
 

 
Significant components of our net deferred tax assets
at March 31, 2024 and 2023 are shown below:


Schedule of deferred tax assets
 
 
 
 
 
 

 
 
YEAR ENDED MARCH 31,
 

 
 
2024
 
 
2023
 

Deferred tax assets:
 
 
 
 
 
 
 
 

Research and development credit carryforwards
 
$
3,442,000
 
 
$
3,442,000
 

Capitalized research and development costs
 
 
646,000
 
 
 
519,000
 

Net operating loss carryforwards(1)
 
 
26,927,000
 
 
 
24,158,000
 

Stock compensation
 
 
2,244,000
 
 
 
1,903,000
 

Total deferred tax assets
 
 
33,259,000
 
 
 
30,022,000
 

 
 
 
 
 
 
 
 
 

Total deferred tax liabilities
 
 
–
 
 
 
–
 

 
 
 
 
 
 
 
 
 

Net deferred tax assets
 
 
33,259,000
 
 
 
30,022,000
 

Valuation allowance for deferred tax assets
 
 
(33,259,000
)
 
 
(30,022,000
)

 
 
 
 
 
 
 
 
 

Net deferred tax assets
 
$
–
 
 
$
–
 


 ______________


(1)
Pursuant to Internal Revenue Code Section 382, use of
    our tax net operating loss carryforwards may be limited. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately
prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. If and when the Company
utilizes the NOL carryforwards in a future period, it will perform an analysis to determine the effect, if any, of these loss limitation
rules on the NOL carryforward balances.

 
At March 31, 2024, we had tax net operating loss carryforwards
for federal and state purposes approximating $98 million and $91 million, respectively, portions of which began to expire in the year
2021. The indefinite position is approximately $36 million. Research and Development credits begin to expire in 2025.
   
The provision for income taxes on earnings subject
to income taxes differs from the statutory federal rate for the years ended March 31, 2024 and 2023 due to the following:


Schedule of provision for income taxes 
 
 
 
 
 
 

 
 
2024
 
 
2023
 

 
 
 
 
 
 
 

Income taxes (benefit) at federal statutory rate of 21.00%
 
$
(2,564,000
)
 
$
(2,526,000
)

Tax effect on non-deductible expenses and credits
 
 
2,000
 
 
 
2,000
 

True up items
 
 
(29,000
) 
 
 
57,000
 

Expiration of net operating loss carryforwards (1)
 
 
204,000
 
 
 
353,000
 

Change in valuation allowance
 
 
2,387,000
 
 
 
2,114,000
 

Income Tax Expense (Benefit)
 
$
–
 
 
$
–
 

 ______________


(1)
Pursuant to Internal Revenue Code Section 382, use of our tax net operating loss carryforwards may be limited.

 
ASC 740, “Income Taxes”, clarifies the
accounting for uncertainty in income taxes recognized in an entity's financial statements, and prescribes recognition thresholds and measurement
attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740, the impact
of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to
be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than
a 50% likelihood of being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. Our practice is to recognize interest and/or penalties related to income tax
matters in income tax expense. During the years ended March 31, 2024 and 2023, we did not recognize any interest or penalties relating
to tax matters.
  
 
 


 F-23 
 

 
At and for the years ended March 31, 2024 and 2023,
management does not believe the Company has any uncertain tax positions. Accordingly, there are no unrecognized tax benefits at March
31, 2024 or March 31, 2023.
 
Our tax returns remain open for examination by the
applicable authorities, generally 3 years for federal and 4 years for state. We are currently not under examination by any taxing authorities.
 
8. COMMITMENTS AND CONTINGENCIES
 
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
 
We have had the following material changes to our
contractual obligations and commitments outside the ordinary course of business during the fiscal year ended March 31, 2024:
 
LEASE COMMITMENTS
 
Office, Lab and Manufacturing Space Leases
 
In December 2020, we entered into an agreement to
lease approximately 2,823 square feet of office space and 1,807 square feet of laboratory space located at 11555 Sorrento Valley Road,
Suite 203, San Diego, California 92121 and 11575 Sorrento Valley Road, Suite 200, San Diego, California 92121, respectively. The agreement
carries a term of 63 months and we took possession of the office space effective October 1, 2021. We took possession of the laboratory
space effective January 1, 2022. In October 2021, we entered into another lease for approximately 2,655 square feet of space to house
our manufacturing operations located at 11588 Sorrento Valley Road, San Diego, California 92121. The term is for 55 months and we took
possession of the manufacturing space in August 2022. The current monthly base rent under the office and laboratory component of the lease
is $14,158. The current monthly base rent under the manufacturing component of the lease is $12,452.
 
The office, lab and manufacturing leases are coterminous
with a remaining term of 36 months. The weighted average discount rate is 4.25%.
 
As of our March 31, 2024 balance sheet, we have a
right-of-use lease asset of $883,054.
 
The following table presents a maturity analysis of
expected undiscounted cash flows for operating leases on an annual basis for the next three fiscal years. All of our leases conterminously
expire during the fiscal year ending March 31, 2027.


Schedule of lease maturity 
  

Fiscal Years Ended March 31, 
  

2025 
$323,812 

2026 
 333,462 

2027 
 343,352 

Total minimum lease payments 
 1,000,626 

Less amount representing imputed interest 
 (60,310)

Present value of minimum lease payments 
$940,316 

 
 
 


 F-24 
 

 
Mobile Clean Room
 
In addition, we rented a mobile clean room on a short
term, month-to-month basis, where we housed our manufacturing operations until our permanent manufacturing space was completed. The mobile
clean room was located on leased land near our office and lab and we paid $2,000 per month for the right to locate it there. The arrangement
was terminated in September 2022 and the mobile clean room was returned to the vendor that leased it to us.
 
Overall, our rent expense, which is included in general
and administrative expenses, approximated $420,353 and $519,000 for the fiscal years ended March 31, 2024 and 2023, respectively.
 
LEGAL MATTERS
 
From time to time, claims are made against us in the
ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties
and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more
products or engaging in other activities.
 
The occurrence of an unfavorable outcome in any specific
period could have a material adverse effect on our results of operations for that period or future periods. We are not presently a party
to any pending or threatened legal proceedings.
 
9. SUBSEQUENT EVENTS
 
Management has evaluated events subsequent to March
31, 2024 through the date that the accompanying consolidated financial statements were filed with the Securities and Exchange Commission
for transactions and other events which may require adjustment of and/or disclosure in such financial statements.
 
Public Offering
 
On May 17, 2024, we closed a public offering pursuant
to which we sold an aggregate of: (i) 2,450,000 shares of our common stock and accompanying Class A warrants to purchase up to 2,450,000
shares of common stock and Class B warrants to purchase up to 2,450,000 shares of common stock, at a combined public offering price of
$0.58 per share and accompanying warrants; and (ii) in lieu of common stock, pre-funded warrants to purchase 5,650,000 shares of common
stock and accompanying Class A warrants to purchase up to 5,650,000 shares of common stock and Class B warrants to purchase up to 5,650,000
shares of common stock, at a combined public offering price of $0.579 per pre-funded warrant and accompanying warrants, which is equal
to the public offering price per share of common stock, and accompanying warrants less the $0.001 per share exercise price of each such
pre-funded warrant.
 
The Class A and Class B warrants each have an exercise
price of $0.58 per share, are immediately exercisable, and, in the case of Class A warrants, will expire on May 17, 2029, and in the case
of Class B warrants, will expire on May 19, 2025. The exercise price of the Class A and Class B warrants is also subject to adjustment
for stock splits, reverse splits, and similar capital transactions as described in such warrants. Maxim Group LLC acted as the exclusive
placement agent for the offering.
 
The gross proceeds from the offering, before deducting
the placement agent’s fees and other offering expenses, were approximately $4.7 million. The Company intends to use the net proceeds
from this offering for general corporate purposes, which may include clinical trial expenses, research and development expenses, capital
expenditures and working capital.
 
In June 2024, holders of Class A and Class B warrants
exercised 295,000 shares and 2,875,000 shares, respectively, for total proceeds of $1,838,600.
 
 
 


 F-25 
 

 
RSU Grants
 
In April 2024, the Board approved, pursuant to the
terms of the Director Compensation Policy, the grant of the annual RSUs under the Director Compensation Policy to each of the four non-employee
directors of the Company then serving on the Board. The Director Compensation Policy provides for a grant of stock options or $50,000
worth of RSUs at the beginning of each fiscal year for current non-employee directors then serving on the Board, and for a grant of stock
options or $75,000 worth of RSUs for a newly elected non-employee director, with each RSU priced at the average for the closing prices
for the five days preceding and including the date of grant, or $1.52 per share for the April 2024 RSU grants. As a result, in April 2024
the four eligible directors were each granted an RSU in the amount of 32,894 shares under the 2020 Plan. The RSUs are subject to vesting
in four equal installments, with 25% of the restricted stock units vesting on each of June 30, 2024, September 30, 2024, December 31,
2024, and March 31, 2025, subject in each case to the director’s Continuous Service (as defined in the 2020 Plan), through such
dates. Vesting will terminate upon the director’s termination of Continuous Service prior to any vesting date.
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 F-26 

 


